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
Principal Executive Officer
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, 2015
Item 1. Report to Stockholders.
SEMI-ANNUAL REPORT
December 31, 2015
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 Multi-Strategy Fund
Brown Advisory Global Leaders 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, 2015 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, 2015. 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, 2015 | 1 |
| Schedule of Investments, December 31, 2015 | 3 |
| Brown Advisory Value Equity Fund | |
| A Message to our Shareholders, December 31, 2015 | 4 |
| Schedule of Investments, December 31, 2015 | 6 |
| Brown Advisory Flexible Equity Fund | |
| A Message to our Shareholders, December 31, 2015 | 7 |
| Schedule of Investments, December 31, 2015 | 9 |
| Brown Advisory Equity Income Fund | |
| A Message to our Shareholders, December 31, 2015 | 10 |
| Schedule of Investments, December 31, 2015 | 12 |
| Brown Advisory Sustainable Growth Fund | |
| A Message to our Shareholders, December 31, 2015 | 13 |
| Schedule of Investments, December 31, 2015 | 15 |
| Brown Advisory Small-Cap Growth Fund | |
| A Message to our Shareholders, December 31, 2015 | 16 |
| Schedule of Investments, December 31, 2015 | 18 |
| Brown Advisory Small-Cap Fundamental Value Fund | |
| A Message to our Shareholders, December 31, 2015 | 20 |
| Schedule of Investments, December 31, 2015 | 22 |
| Brown Advisory Multi-Strategy Fund | |
| A Message to our Shareholders, December 31, 2015 | 23 |
| Schedule of Investments, December 31, 2015 | 24 |
| Brown Advisory Global Leaders Fund | |
| A Message to our Shareholders, December 31, 2015 | 25 |
| Schedule of Investments, December 31, 2015 | 28 |
| Brown Advisory Intermediate Income Fund | |
| A Message to our Shareholders, December 31, 2015 | 29 |
| Schedule of Investments, December 31, 2015 | 30 |
| Brown Advisory Total Return Fund | |
| A Message to our Shareholders, December 31, 2015 | 33 |
| Schedule of Investments, December 31, 2015 | 34 |
| Brown Advisory Strategic Bond Fund | |
| A Message to our Shareholders, December 31, 2015 | 37 |
| Schedule of Investments, December 31, 2015 | 39 |
| Brown Advisory Maryland Bond Fund | |
| A Message to our Shareholders, December 31, 2015 | 42 |
| Schedule of Investments, December 31, 2015 | 43 |
| Brown Advisory Tax Exempt Bond Fund | |
| A Message to our Shareholders, December 31, 2015 | 46 |
| Schedule of Investments, December 31, 2015 | 47 |
| Brown Advisory Mortgage Securities Fund | |
| A Message to our Shareholders, December 31, 2015 | 50 |
| Schedule of Investments, December 31, 2015 | 51 |
| Brown Advisory – WMC Strategic European Equity Fund | |
| A Message to our Shareholders, December 31, 2015 | 57 |
| Schedule of Investments, December 31, 2015 | 59 |
| Brown Advisory – WMC Japan Alpha Opportunities Fund | |
| A Message to our Shareholders, December 31, 2015 | 61 |
| Schedule of Investments, December 31, 2015 | 63 |
| Brown Advisory – Somerset Emerging Markets Fund | |
| A Message to our Shareholders, December 31, 2015 | 66 |
| Schedule of Investments, December 31, 2015 | 67 |
| Brown Advisory Emerging Markets Small-Cap Fund | |
| A Message to our Shareholders, December 31, 2015 | 69 |
| Schedule of Investments, December 31, 2015 | 71 |
| Statements of Assets and Liabilities | 73 |
| Statements of Operations | 78 |
| Statements of Changes in Net Assets | 83 |
| Financial Highlights | 93 |
| Notes to Financial Statements | 137 |
| 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.
Barclays US Corporate High Yield Index measures the US Dollar denominated, high-yield, fixed-rate corporate bond market.
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.
CAPEX, or capital expenditures, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm. This type of outlay is also made by companies to maintain or increase the scope of their operations.
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 Asia Small-Cap Index captures small-cap representation across 8 Emerging Markets countries.
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 Global Large Cap Index measures the performance of the largest securities in the Russell Global Index, based on market capitalization.
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. The unhedged version of this index does not eliminate 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.
Yield Spread is the difference between yields on differing securities, calculated by deducting the yield of one security from another.
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, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Growth Equity Fund Investor Shares (the “Fund”) rose by 1.97% in value. During the same period, the Russell 1000 Growth Index, the Fund’s benchmark, increased 1.64%.
Several factors contributed to market volatility from the beginning of June through the end of December, namely geopolitical instability, China’s flagging economy and the Federal Reserve’s long-awaited increase in the benchmark interest rate. Although a narrow group of large capitalization stocks have provided much of the gains for the broad market, both volatility and dispersion among a range of stock prices helped create an environment that was more conducive to generating excess returns for our approach. During the past five quarters we have taken advantage of the opportunities created by the volatility. Stock turnover within the portfolio has notably increased, a pattern that has historically helped our strategy to generate excess returns.
The highlight from a relative performance perspective has been our holdings in the consumer sector. Amazon.com, which we added to the portfolio in January, was the biggest contributor. Amazon.com’s business model is not well understood among many equity analysts, partly because the company has not operated with a high degree of transparency. For example, the company did not provide separate reporting for Amazon Web Services (AWS), a pioneer and leader in providing cloud-computing infrastructure to corporate customers around the world. Its limited reporting of this business’s progress veiled the long-term growth potential of the business model, contributing to a period of weakness in the stock. Amazon recently began providing more segment detail, showing that the cloud business is more profitable than many analysts expected. This, coupled with improvements in their online consumer business, caused the stock to move higher.
Industrials created the biggest drag on the portfolio during the period. Colfax, which was a relatively small position, fell sharply as many of their end markets rapidly deteriorated. Our investment thesis for Colfax was based on the management team’s long and successful history of growth by acquisition very similar to another long time holding—Danaher. They have a proven track record of consolidating businesses by streamlining operations and implementing a variety of best-in-class manufacturing and operational techniques. While we still believe Colfax is capable of accomplishing this, its ability to grow rapidly became hindered by falling demand for fabrication technology in a variety of commodity-sensitive regions such as South America. Due to these headwinds we no longer have confidence that its base business can meet our growth criteria, and we are in the process of eliminating Colfax from the portfolio.
We are replacing Colfax with Westinghouse Air Brake Technologies (“Wabtec”). Wabtec is a leading manufacturer of electronic control and braking technology for the global rail industry. North American freight volumes have recently declined, causing the stock to sell off and creating an attractive opportunity for starting to build our position. There are several factors that make Wabtec an attractive investment opportunity, including what we believe to be a favorable regulatory environment and a recent acquisition that gives them exposure to the European commuter rail market, reducing the cyclicality of the business. We believe that Wabtec has a much more promising outlook for growth than Colfax.
While the market environment for fundamentally strong companies has improved recently, over the long term the market’s regard for best-in-breed, sustainable-growth companies never perishes. We acknowledge that from time to time many investors will focus on other things, including fluctuating currencies, the interest-rate environment, a desire for yield or the immediate gratification of owning an appreciating stock. For long-term investors, such considerations pale next to the importance of owning sound businesses. Given the issues that we have faced in the past, we endeavor to constantly remind ourselves of this truth.
Sincerely,
Kenneth M. Stuzin, CFA
Portfolio Manager
Brown Advisory Growth Equity Fund
A Message to Our Shareholders
December 31, 2015
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. 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. 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.
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.
Brown Advisory Growth Equity Fund
Schedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 96.7% | | | |
| | | | |
| Consumer Discretionary — 14.3% | | | |
| | 170,103 | | Amazon.com, Inc.* | | | 114,970,917 | |
| | 1,660,729 | | Starbucks Corp. | | | 99,693,562 | |
| | 994,400 | | TripAdvisor, Inc.* | | | 84,772,600 | |
| | 506,663 | | Under Armour, Inc.* | | | 40,842,104 | |
| | | | | | | 340,279,183 | |
| Consumer Staples — 9.8% | | | | |
| | 501,769 | | Costco Wholesale Corp. | | | 81,035,693 | |
| | 940,845 | | Estee Lauder Companies, Inc. | | | 82,850,811 | |
| | 878,901 | | Mead Johnson Nutrition Co. | | | 69,389,234 | |
| | | | | | | 233,275,738 | |
| Energy — 1.5% | | | | |
| | 1,224,649 | | FMC Technologies, Inc.* | | | 35,527,068 | |
| | | | | |
| Financials — 3.4% | | | | |
| | 2,431,621 | | Charles Schwab Corp. | | | 80,073,280 | |
| | | | | |
| Health Care — 15.2% | | | | |
| | 318,862 | | Alexion Pharmaceuticals, Inc.* | | | 60,822,927 | |
| | 1,199,742 | | Bristol-Myers Squibb Co. | | | 82,530,252 | |
| | 699,286 | | DaVita HealthCare Partners, Inc.* | | | 48,747,227 | |
| | 1,001,591 | | Express Scripts Holding Co.* | | | 87,549,069 | |
| | 148,081 | | Intuitive Surgical, Inc.* | | | 80,875,919 | |
| | | | | | | 360,525,394 | |
| Industrials — 10.5% | | | | |
| | 331,283 | | Colfax Corp.* | | | 7,735,458 | |
| | 902,720 | | Danaher Corp. | | | 83,844,634 | |
| | 1,207,497 | | Fastenal Co. | | | 49,290,027 | |
| | 668,356 | | Stericycle, Inc.* | | | 80,603,734 | |
| | 369,867 | | Westinghouse Air Brake Technologies Corp. | | | 26,304,941 | |
| | | | | | | 247,778,794 | |
| Information Technology — 39.0% | | | | |
| | 863,097 | | Akamai Technologies, Inc.* | | | 45,424,795 | |
| | 66,139 | | Alphabet Inc. — Class A* | | | 51,456,803 | |
| | 67,112 | | Alphabet Inc. — Class C* | | | 50,929,955 | |
| | 1,297,154 | | Amphenol Corp. | | | 67,750,353 | |
| | 481,770 | | ANSYS, Inc.* | | | 44,563,725 | |
| | 572,580 | | Apple, Inc. | | | 60,269,771 | |
| | 1,072,223 | | Cognizant Technology Solutions Corp.* | | | 64,354,824 | |
| | 986,460 | | Facebook, Inc.* | | | 103,242,904 | |
| | 367,095 | | Fleetcor Technologies Inc.* | | | 52,468,888 | |
| | 2,311,179 | | Genpact, Ltd.* | | | 57,733,251 | |
| | 1,119,711 | | National Instruments Corp. | | | 32,124,509 | |
| | 460,096 | | NetSuite, Inc.* | | | 38,933,324 | |
| | 790,517 | | NXP Semiconductors NV* | | | 66,601,057 | |
| | 998,520 | | salesforce.com, Inc.* | | | 78,283,968 | |
| | 1,423,514 | | Visa, Inc. | | | 110,393,511 | |
| | | | | | | 924,531,638 | |
| Materials — 3.0% | �� | | | |
| | 629,327 | | Ecolab, Inc. | | | 71,982,422 | |
| Total Common Stocks (Cost $1,575,651,572) | | | 2,293,973,517 | |
| | | | | | | | |
| Short-Term Investments — 3.3% | | | | |
| | | | | |
| Money Market Funds — 3.3% | | | | |
| | 79,083,562 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 79,083,562 | |
| Total Short-Term Investments (Cost $79,083,562) | | | 79,083,562 | |
| Total Investments — 100.0% (Cost $1,654,735,134) | | | 2,373,057,079 | |
| Other Assets in Excess of Liabilities — 0.0% | | | 611,566 | |
| NET ASSETS — 100.0% | | $ | 2,373,668,645 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Information Technology | | | 39.0 | % |
| Health Care | | | 15.2 | % |
| Consumer Discretionary | | | 14.3 | % |
| Industrials | | | 10.5 | % |
| Consumer Staples | | | 9.8 | % |
| Financials | | | 3.4 | % |
| Money Market Funds | | | 3.3 | % |
| Materials | | | 3.0 | % |
| Energy | | | 1.5 | % |
| Other Assets and Liabilities | | | 0.0 | % |
| | | | 100.0 | % |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Value Equity Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Value Equity Fund Investor Shares (the “Fund”) decreased 8.21% in value. During the same period, the Russell 1000 Value Index (the Index), the Fund’s benchmark, decreased 3.23%.
After successfully navigating a sideways market in the first half of the year, the Fund trailed the benchmark during the second half of 2015. The landscape for value investing was challenging. Growth outperformed value by a wide margin, with the two investing styles diverging further with each passing month. Stock selection was challenged by a concentrated number of winners and deep losers in most sectors.
Consumer staples was our strongest performing sector during the six-month period. Philip Morris, one of our two consumer staples holdings, had double-digit returns, well-above the 1.6% return for the benchmark sector, while also providing additional income with an attractive dividend yield. Energy and materials were the worst performing sectors in the benchmark, but inconsequential to our relative performance given our underweight positioning in these sectors. We have taken measures during the course of the year to reduce our exposure to energy and commodity-driven cyclicals.
The market was hit hard in August 2015 by the decision by China to devalue its currency in attempt to support its slowing economy. The announcement triggered fears that Chinese economic weakness would spill-over to its trading partners around the world and resulted in widespread selling of risk assets. In the Fund, particularly among industrials, companies exposed to emerging markets and export-producing nations faced sizable selling pressure. Joy Global and Copa Holdings were both casualties of the global slowdown and weakness in commodities. Industrials accounted for nearly a third of the Fund’s underperformance.
The consumer discretionary sector was also challenged, particularly in the fourth quarter of 2015. Investors pulled back from the sector as early indications suggested weak spending patterns before the holiday season. Traditional retailers struggled, and the consumer electronics category was especially weak. Best Buy, our best performing stock in the third quarter with a 14% gain, fell 17% in the fourth quarter. GameStop, another strong gainer for most of 2015, neared a 52-week high in early November before ending the year at its 52-week low. The moves in both stocks reflect not only increasing market volatility during the period, but also the sharp reaction by the market for companies that report slowing growth or miss investor expectations.
The technology sector also lagged during the period after fueling positive performance in prior months. Weakness in semis and communication-related names weighed on the portfolio. These detractors counteracted strength in Microsoft, which was the top-performing company in the Fund during the second half of 2015.
In terms of portfolio activity, we acquired four stocks, including two corporate spins that we continue to own, and we eliminated nine portfolio holdings.
We bought Liberty Media, an owner of several public and private entertainment-related companies that includes satellite radio provider Sirius XM, concert promoter Live Nation and the Atlanta Braves baseball team. We like the business model and strong free-cash-flow generation of Sirius XM, and believe that a pending recapitalization into separate tracking stocks will help unlock value in Liberty Media’s underlying assets. We also bought Michael Kors, and in the process swapped out of our position in handbag competitor Coach. Michael Kors generates strong free cash flow and has high profit returns, but enjoys a less expensive valuation and has better growth prospects.
We sold Baxter after the company reached our target for valuation. We also sold Ensco, Potash, Copa Holdings, Joy Global and Plains GP Holdings. These names were detractors to performance primarily because of challenging end markets, declining commodity prices and unfavorable supply-demand trends. Their exposure to persistent external macro factors outside of management control overwhelmed the business attributes that originally attracted us to these companies. Lastly we exited NetApp and Discovery which, while trading near the low end of their historical ranges, face secular pressures that complicate their efforts to unlock value.
Over the past several years, growth stocks have outperformed value stocks, with the multi-divergence approaching that of the Tech Bubble years. As such, we believe value stocks offer compelling value for investors today. Many of our holdings discount steep earnings declines despite their current sound fundamentals. Our large holdings in health care, technology, financials and consumer discretionary sectors look particularly attractive in our view. We are de-emphasizing commodity-cyclical and macro-sensitive names, and focusing on “self-help” companies that we believe can grow earnings as a result of streamlining operations or adapting
Brown Advisory Value Equity FundA Message to Our Shareholders
December 31, 2015
a more reliable business model. In this period of enhanced market volatility we are pruning the portfolio of weaker businesses while strengthening it with companies we believe are in a better competitive position, with stronger balance sheets that generate free cash flow and deploy it to enhance shareholder returns. As such, we believe the Fund is better positioned than previously to weather global economic uncertainties.
Sincerely,
Rick M. Bernstein, CFA
Portfolio Manager
Doron S. Eisenberg, 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. 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.
Brown Advisory Value Equity FundSchedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 95.5% | | | |
| | | | |
| Consumer Discretionary — 9.7% | | | |
| | 86,454 | | Best Buy, Inc. | | | 2,632,525 | |
| | 38,680 | | GameStop Corp. | | | 1,084,587 | |
| | 77,429 | | Garmin, Ltd. | | | 2,878,036 | |
| | 36,213 | | Liberty Media Corp.* | | | 1,378,991 | |
| | 43,847 | | Michael Kors Holdings, Ltd.* | | | 1,756,511 | |
| | 44,295 | | Viacom, Inc. | | | 1,823,182 | |
| | | | | | | 11,553,832 | |
| Consumer Staples — 5.9% | | | | |
| | 39,472 | | Philip Morris International, Inc. | | | 3,469,983 | |
| | 83,112 | | Unilever NV ADR | | | 3,600,412 | |
| | | | | | | 7,070,395 | |
| Energy — 7.7% | | | | |
| | 19,598 | | National Oilwell Varco, Inc. | | | 656,337 | |
| | 38,852 | | Occidental Petroleum Corp. | | | 2,626,784 | |
| | 67,957 | | Oceaneering International, Inc. | | | 2,549,746 | |
| | 130,851 | | Suncor Energy, Inc. | | | 3,375,956 | |
| | | | | | | 9,208,823 | |
| Financials — 24.5% | | | | |
| | 36,989 | | Ameriprise Financial, Inc. | | | 3,936,369 | |
| | 87,452 | | Charles Schwab Corp. | | | 2,879,794 | |
| | 75,535 | | Forest City Enterprises, Inc.* | | | 1,656,483 | |
| | 76,534 | | JPMorgan Chase & Co. | | | 5,053,540 | |
| | 42,400 | | Northern Trust Corp. | | | 3,056,616 | |
| | 339,993 | | Regions Financial Corp. | | | 3,263,933 | |
| | 95,271 | | SunTrust Banks, Inc. | | | 4,081,410 | |
| | 94,548 | | Synovus Financial Corp. | | | 3,061,464 | |
| | 31,723 | | T. Rowe Price Group, Inc. | | | 2,267,877 | |
| | | | | | | 29,257,486 | |
| Health Care — 17.5% | | | | |
| | 80,633 | | AbbVie, Inc. | | | 4,776,699 | |
| | 40,609 | | Baxalta, Inc. | | | 1,584,969 | |
| | 98,405 | | Hologic, Inc.* | | | 3,807,290 | |
| | 38,370 | | Merck & Co., Inc. | | | 2,026,703 | |
| | 30,586 | | Novartis AG ADR | | | 2,631,619 | |
| | 29,932 | | Sanofi S.A. ADR | | | 1,276,600 | |
| | 73,882 | | Teva Pharmaceutical Industries, Ltd. ADR | | | 4,849,615 | |
| | | | | | | 20,953,495 | |
| Industrials — 4.7% | | | | |
| | 123,102 | | General Electric Co. | | | 3,834,627 | |
| | 38,646 | | PACCAR, Inc. | | | 1,831,821 | |
| | | | | | | 5,666,448 | |
| Information Technology — 25.5% | | | | |
| | 32,790 | | Apple, Inc. | | | 3,451,475 | |
| | 32,101 | | Check Point Software Technologies, Ltd.* | | | 2,612,379 | |
| | 154,721 | | Cisco Systems, Inc. | | | 4,201,449 | |
| | 97,062 | | CommScope Holdings Co, Inc.* | | | 2,512,935 | |
| | 89,795 | | eBay, Inc.* | | | 2,467,567 | |
| | 44,226 | | Microchip Technology, Inc. | | | 2,058,278 | |
| | 185,452 | | Micron Technology, Inc.* | | | 2,626,000 | |
| | 57,728 | | Microsoft Corp. | | | 3,202,750 | |
| | 37,234 | | PayPal Holdings, Inc.* | | | 1,347,871 | |
| | 59,036 | | QUALCOMM, Inc. | | | 2,950,915 | |
| | 90,001 | | Yahoo, Inc.* | | | 2,993,433 | |
| | | | | | | 30,425,052 | |
| Total Common Stocks (Cost $94,911,466) | | | 114,135,531 | |
| | | | | |
| Real Estate Investment Trusts — 2.6% | | | | |
| | 52,058 | | W.P. Carey, Inc. | | | 3,071,422 | |
| Total Real Estate Investment Trusts (Cost $3,007,762) | | | 3,071,422 | |
| | | | | |
| Short-Term Investments — 2.1% | | | | |
| | | | | |
| Money Market Funds — 2.1% | | | | |
| | 2,462,474 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 2,462,474 | |
| Total Short-Term Investments (Cost $2,462,474) | | | 2,462,474 | |
| Total Investments — 100.2% (Cost $100,381,702) | | | 119,669,427 | |
| Liabilities in Excess of Other Assets — (0.2)% | | | (240,492 | ) |
| NET ASSETS — 100.0% | | $ | 119,428,935 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Information Technology | | | 25.5 | % |
| Financials | | | 24.5 | % |
| Health Care | | | 17.5 | % |
| Consumer Discretionary | | | 9.7 | % |
| Energy | | | 7.7 | % |
| Consumer Staples | | | 5.9 | % |
| Industrials | | | 4.7 | % |
| Real Estate Investment Trusts | | | 2.6 | % |
| Money Market Funds | | | 2.1 | % |
| Other Assets and Liabilities | | | (0.2 | )% |
| | | | 100.0 | % |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Flexible Equity FundA Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Flexible Equity Fund Investor Shares (the “Fund”) decreased 2.47% in value. The S&P 500 Index, the Fund’s benchmark, increased 0.15% during the same period. The relative drag in performance for the six months stemmed mostly from the performance of Kinder Morgan, Inc., which we discuss in detail below.
The biggest contributors to the Fund’s results in the six-month period were Alphabet, Inc. Class A & C (formerly known as Google), a leader in on-line search; Visa, a global payments processor and Microsoft, a leading software developer and marketer. Our best contributors to performance are classified as information technology stocks, although we take a broader view of their businesses. Alphabet obviously is involved in innovative technology but we think of its business more like a media company in its economics because it derives most of its revenue from advertising to those who seek its catalog of the world’s information. The transaction processing network of Visa puts the company in the technology sector, but we view Visa as a “tollbooth” on consumer spending around the world, benefiting from growing use of non-cash forms of payment.
We prefer businesses with what we believe are advantages that differentiate them from competitors. The network effects present at Alphabet and Visa are examples of this. The scale and ubiquity of these businesses have allowed them to earn high economic returns and make them difficult to displace. Seeking business advantages generally keeps our exposure to commodity-oriented areas low compared to the S&P 500 Index benchmark, since differentiation is generally harder to gain in commodity businesses. Although our direct exposure to the energy sector was below the benchmark weight, our holding in Kinder Morgan proved detrimental and the share prices of some of our non-energy holdings were hurt by the portions of their businesses tied to energy markets.
The most significant detractors to the Fund’s performance were Kinder Morgan, a pipeline transportation company, Copa Holdings, a Latin American airline and Anthem, a managed care company.
Kinder Morgan’s stock fell 60% during the six-month period. We viewed Kinder’s fuel transport business as having low sensitivity to energy prices, but its reliance on capital markets to fund construction of new pipelines and expand capacity at existing lines was costly when investors’ appetite waned for funding new energy investments. Kinder was forced to either cut its investment projects or its dividend, and it chose to reduce its dividend by 75%, from $2 to 50 cents per share. The cash flows supporting the previous $2 dividend and debt service are largely intact, so we have kept our stock despite the disappointment in share price.
We eliminated Copa Holdings and National Oilwell Varco. Both businesses have suffered reverses in their fundamental outlooks and we took our capital out to invest elsewhere. We initiated new investments in Ameriprise Financial, Inc., an asset manager and insurance provider, and Yahoo!, an Internet company.
We are impressed by the capital allocation at Ameriprise with consistent declines in shares outstanding leveraging long-term growth in operating profits. We believe Ameriprise is modestly valued, that share repurchases will benefit shareholders and valuation may improve as Ameriprise’s business mix tilts more toward asset management over time.
The new investment in Yahoo! is based on the sum of its various parts and on finding a potential realizable value that is considerably above the current trading price. Yahoo has a meaningful holding in Alibaba, the Chinese Internet company as well as other investments which we believe are not fully reflected in Yahoo’s share price. We are long-term bullish on Alibaba, but as it commands a high valuation, we believe buying Yahoo is a lower risk investment.
New holding PayPal Holdings, Inc. was a spin-off from existing holding eBay. We first purchased eBay last year in part to invest in the growing PayPal payments platform.
We have seen seven consecutive years of rising equity markets and six years of economic growth. Yet neither stocks nor the economy move in just one direction. All this is to reiterate that volatility in markets should not be a surprise—it should always be expected.
We write often about expectations so our investors will have staying power across challenging markets and periods of under-performance that all active managers experience. Trying to get completely in or out of markets based on outlook is at best a challenging proposition. The near-term outlook is quickly reflected in share prices while the long-term record of economic progress and innovation in the U.S. is often dismissed when the near-term becomes “uncertain.” It is never certain. Likewise, switching from thoughtfully selected managers often based on recent results is challenging as it tends toward selling low and buying high.
Brown Advisory Flexible Equity FundA Message to Our Shareholders
December 31, 2015
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 and medium-sized 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.
Brown Advisory Flexible Equity Fund
Schedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 95.0% | | | |
| | | | |
| Consumer Discretionary — 15.7% | | | |
| | 225,329 | | Best Buy, Inc. | | | 6,861,268 | |
| | 116,522 | | CarMax, Inc.* | | | 6,288,692 | |
| | 122,614 | | Lowe’s Companies, Inc. | | | 9,323,569 | |
| | 7,622 | | Priceline Group, Inc.* | | | 9,717,669 | |
| | 84,740 | | TJX Companies, Inc. | | | 6,008,914 | |
| | 87,854 | | Walt Disney Co. | | | 9,231,698 | |
| | | | | | | 47,431,810 | |
| Consumer Staples — 1.4% | | | | |
| | 41,800 | | PepsiCo, Inc. | | | 4,176,656 | |
| | | | | |
| Energy — 4.4% | | | | |
| | 348,842 | | Kinder Morgan, Inc. | | | 5,204,723 | |
| | 84,703 | | Occidental Petroleum Corp. | | | 5,726,770 | |
| | 61,393 | | Oceaneering International, Inc. | | | 2,303,465 | |
| | | | | | | 13,234,958 | |
| Financials — 20.8% | | | | |
| | 53,899 | | American Express Co. | | | 3,748,675 | |
| | 35,344 | | Ameriprise Financial, Inc. | | | 3,761,308 | |
| | 193,049 | | Bank of America Corp. | | | 3,249,014 | |
| | 102,870 | | Berkshire Hathaway, Inc.* | | | 13,582,955 | |
| | 288,943 | | Charles Schwab Corp. | | | 9,514,893 | |
| | 85,935 | | Franklin Resources, Inc. | | | 3,164,127 | |
| | 107,890 | | JPMorgan Chase & Co. | | | 7,123,977 | |
| | 360,943 | | Regions Financial Corp. | | | 3,465,053 | |
| | 42,102 | | T. Rowe Price Group, Inc. | | | 3,009,872 | |
| | 228,997 | | Wells Fargo Co. | | | 12,448,277 | |
| | | | | | | 63,068,151 | |
| Health Care — 13.2% | | | | |
| | 54,006 | | Anthem, Inc. | | | 7,530,596 | |
| | 89,608 | | Edwards Lifesciences Corp.* | | | 7,077,240 | |
| | 137,407 | | Express Scripts Holding Co.* | | | 12,010,746 | |
| | 49,932 | | Merck & Co., Inc. | | | 2,637,408 | |
| | 164,528 | | Teva Pharmaceutical Industries, Ltd. ADR | | | 10,799,618 | |
| | | | | | | 40,055,608 | |
| Industrials — 8.5% | | | | |
| | 162,448 | | Canadian National Railway Co. | | | 9,077,594 | |
| | 21,666 | | Canadian Pacific Railway, Ltd. | | | 2,764,582 | |
| | 61,274 | | Owens Corning | | | 2,881,716 | |
| | 82,973 | | United Rentals, Inc.* | | | 6,018,861 | |
| | 51,796 | | United Technologies Corp. | | | 4,976,042 | |
| | | | | | | 25,718,795 | |
| Information Technology — 29.6% | | | | |
| | 72,368 | | Accenture PLC | | | 7,562,456 | |
| | 12,860 | | Alphabet Inc. — Class C* | | | 9,759,197 | |
| | 7,299 | | Alphabet Inc. — Class A* | | | 5,678,695 | |
| | 75,538 | | Apple, Inc. | | | 7,951,130 | |
| | 116,578 | | eBay, Inc.* | | | 3,203,563 | |
| | 10,740 | | International Business Machines Corp. | | | 1,478,039 | |
| | 117,350 | | MasterCard, Inc. | | | 11,425,196 | |
| | 156,619 | | Microsoft Corp. | | | 8,689,222 | |
| | 117,400 | | PayPal Holdings, Inc.* | | | 4,249,880 | |
| | 113,927 | | QUALCOMM, Inc. | | | 5,694,641 | |
| | 229,517 | | Visa, Inc. | | | 17,799,043 | |
| | 186,448 | | Yahoo, Inc.* | | | 6,201,261 | |
| | | | | | | 89,692,323 | |
| Telecommunication Services — 1.4% | | | | |
| | 47,216 | | Crown Castle International Corp. | | | 4,081,823 | |
| Total Common Stocks (Cost $235,958,046) | | | 287,460,124 | |
| | | | | |
| Warrants — 0.1% | | | | |
| | 20,000 | | Wells Fargo Co.* | | | 409,800 | |
| Total Warrants (Cost $221,299) | | | 409,800 | |
| | | | | |
| Short-Term Investments — 4.2% | | | | |
| | | | | |
| Money Market Funds — 4.2% | | | | |
| | 12,849,594 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 12,849,594 | |
| Total Short-Term Investments (Cost $12,849,594) | | | 12,849,594 | |
| Total Investments — 99.3% (Cost $249,028,939) | | | 300,719,518 | |
| Other Assets in Excess of Liabilities — 0.7% | | | 2,030,466 | |
| NET ASSETS — 100.0% | | $ | 302,749,984 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Information Technology | 29.6% |
| Financials | 20.9% |
| Consumer Discretionary | 15.7% |
| Health Care | 13.2% |
| Industrials | 8.5% |
| Energy | 4.4% |
| Money Market Funds | 4.2% |
| Consumer Staples | 1.4% |
| Telecommunication Services | 1.4% |
| Other Assets and Liabilities | 0.7% |
| | 100.0% |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Equity Income FundA Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Equity Income Fund Investor Shares (the “Fund”) fell 4.08% in value while the S&P 500 Index, the Fund’s benchmark, rose 0.15%.
The nearly flat performance of the S&P 500 Index during the six month period masked a fair degree of volatility intra-period, especially a sharp sell-off of stocks during mid-August and a rapid rebound in prices during October. The Fund performed in line with the S&P 500 Index during the sell-off but lagged the Index during the subsequent rebound as investor sentiment shifted from positive to negative to positive once again.
The Fund’s consumer staples holdings performed well throughout the period and outperformed the benchmark’s performance, led by gains in tobacco stocks Altria and Philip Morris International. In the case of Altria, the company’s core tobacco products continued to gain share in the U.S. Also, Altria’s large stake in brewer SAB Miller benefitted during the period from the announcement that AB InBev intends to combine operations with SAB Miller.
The Fund’s financial holdings, which has included investments in Real Estate Investment Trusts (“REITs”), also outperformed the benchmark’s performance. Plum Creek Timber gained following the announcement of its planned merger with fellow timber REIT Weyerhaeuser. The proposed acquisition price reflected an attractive premium for Plum Creek shareholders. Additionally, Cincinnati Financial and Erie Indemnity rose as both companies reported steady earnings results from their core property and casualty insurance operations.
In the case of the Fund’s main energy holdings—Kinder Morgan and Plains GP—a severe shift in investor sentiment led to meaningful underperformance compared with the benchmark during the period. Investor jitters toward energy companies in the first half of the year were generally due to lower commodity prices and turned into outright fear in the second half of the year. As concerns about credit quality became paramount, financing options for entities with less-than-perfect financial profiles all but disappeared. This resulted in a plunge in the equity values of Kinder Morgan and Plains GP, which rely on access to the capital markets to fund future growth.
Several investments in the consumer discretionary sector also performed poorly, and holdings in the sector overall underperformed the benchmark. Concerns that US consumer spending was weakening ahead of the all-important holiday season hurt the stock prices of video game retailer GameStop and electronics retailer Best Buy. V.F. Corp. also declined on worries that warmer weather and elevated retailer inventories would impair the apparel-maker’s wintertime results, particularly sales of The North Face line of branded outerwear.
We reduced our holdings of Kinder Morgan and Plains GP as the difficult capital market conditions compelled both companies to reduce their future growth plans. In the case of Kinder Morgan, dividends to investors will also be reduced from 2015 to 2016 as the company retains capital to fund its growth projects. Fellow energy holdings Total and Black Stone Minerals were eliminated during the period, bringing the Fund’s current weighting in energy below the benchmark’s weight. Elsewhere, Copa Holdings was eliminated as the airline’s earnings and dividend were hurt by prolonged economic downturns in the Latin American countries that it serves. The Fund has no current exposure to utilities or to the telecommunications sector, following the elimination of Canadian wireless and cable services provider Rogers Communications. Rogers operates in a mature and highly competitive market that limits its potential earnings and dividend growth.
The Fund’s new holdings include networking equipment provider Cisco Systems and diversified financial services provider Ameriprise Financial. Both investments share low starting dividend payout ratios, raising the prospect that future dividend growth has the potential to exceed underlying earnings growth as the payout to shareholders rises over time. Willis Group Holdings was added within the financial sector. We believe the combination of Willis with merger partner Towers Watson creates a stronger, more diversified insurance and consulting services provider with a bright outlook for accelerating future capital returns to shareholders. Bank holding company M&T Bank and jumbo mortgage specialist Redwood Trust were eliminated as the dividend growth outlook for both companies compared unfavorably to other investments within the financial sector, including Ameriprise and Willis.
At the start of 2016, investors appear to be more skeptical regarding expectations for earnings growth and overall market returns. If the reduced outlook for earnings produces a sustained period of downward pressure on stock prices, we expect the Fund to have the potential to provide the same sort of downside protection in a weak market relative to the Index as it has in the past. And as investor skepticism builds, we believe that the opportunities to deploy capital and make sensible long-term investments will only
Brown Advisory Equity Income FundA Message to Our Shareholders
December 31, 2015
grow. Indeed, the Fund’s turnover picked up as 2015 progressed and stock price volatility created opportunities. Amidst that backdrop, we are enthusiastic that we will continue to find what we believe are attractive additions to the Fund’s current portfolio of high-quality investments that offer above-average yields and strong potential for future growth at reasonable valuations.
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.
Brown Advisory Equity Income FundSchedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 87.8% | | | |
| | | | |
| Consumer Discretionary — 13.2% | | | |
| | 95,197 | | Best Buy, Inc. | | | 2,898,749 | |
| | 55,379 | | GameStop Corp. | | | 1,552,827 | |
| | 107,675 | | Garmin, Ltd. | | | 4,002,280 | |
| | 31,378 | | McDonald’s Corp. | | | 3,706,997 | |
| | 62,294 | | Target Corp. | | | 4,523,167 | |
| | 77,822 | | V.F. Corp. | | | 4,844,419 | |
| | | | | | | 21,528,439 | |
| Consumer Staples — 12.8% | | | | |
| | 138,776 | | Altria Group, Inc. | | | 8,078,151 | |
| | 61,185 | | Coca-Cola Co. | | | 2,628,507 | |
| | 61,000 | | Philip Morris International, Inc. | | | 5,362,510 | |
| | 110,309 | | Unilever NV ADR | | | 4,778,586 | |
| | | | | | | 20,847,754 | |
| Energy — 4.3% | | | | |
| | 96,491 | | Kinder Morgan, Inc. | | | 1,439,646 | |
| | 50,510 | | Occidental Petroleum Corp. | | | 3,414,981 | |
| | 230,137 | | Plains GP Holdings L.P. | | | 2,174,795 | |
| | | | | | | 7,029,422 | |
| Financials — 15.9% | | | | |
| | 31,936 | | Ameriprise Financial, Inc. | | | 3,398,629 | |
| | 55,824 | | Cincinnati Financial Corp. | | | 3,303,106 | |
| | 38,911 | | Erie Indemnity Co. | | | 3,721,448 | |
| | 68,949 | | JPMorgan Chase & Co. | | | 4,552,703 | |
| | 100,373 | | OneBeacon Insurance Group, Ltd. | | | 1,245,629 | |
| | 26,295 | | T. Rowe Price Group, Inc. | | | 1,879,830 | |
| | 79,254 | | Wells Fargo Co. | | | 4,308,247 | |
| | 73,888 | | Wills Towers Watson PLC | | | 3,588,740 | |
| | | | | | | 25,998,332 | |
| Health Care — 14.0% | | | | |
| | 81,149 | | AbbVie, Inc. | | | 4,807,267 | |
| | 42,192 | | Johnson & Johnson | | | 4,333,962 | |
| | 62,895 | | Merck & Co., Inc. | | | 3,322,114 | |
| | 58,736 | | Novartis AG ADR | | | 5,053,646 | |
| | 82,535 | | Teva Pharmaceutical Industries, Ltd. ADR | | | 5,417,597 | |
| | | | | | | 22,934,586 | |
| Industrials — 11.0% | | | | |
| | 147,695 | | General Electric Co. | | | 4,600,699 | |
| | 107,305 | | Healthcare Services Group, Inc. | | | 3,741,725 | |
| | 79,994 | | Nielsen Holdings NV | | | 3,727,721 | |
| | 48,523 | | PACCAR, Inc. | | | 2,299,990 | |
| | 37,663 | | United Technologies Corp. | | | 3,618,285 | |
| | | | | | | 17,988,420 | |
| Information Technology — 15.5% | | | | |
| | 36,046 | | Accenture PLC | | | 3,766,807 | |
| | 32,256 | | Apple, Inc. | | | 3,395,267 | |
| | 58,274 | | Automatic Data Processing, Inc. | | | 4,936,973 | |
| | 86,879 | | Cisco Systems, Inc. | | | 2,359,199 | |
| | 128,239 | | Microsoft Corp. | | | 7,114,700 | |
| | 73,847 | | QUALCOMM, Inc. | | | 3,691,242 | |
| | | | | | | 25,264,188 | |
| | | | | | | | |
| Materials — 1.1% | | | | |
| | 17,838 | | Praxair, Inc. | | | 1,826,611 | |
| Total Common Stocks (Cost $113,354,811) | | | 143,417,752 | |
| | | | | |
| Preferred Stocks — 2.4% | | | | |
| | 152,454 | | Public Storage, Inc. — Series S | | | 3,945,509 | |
| Total Preferred Stocks (Cost $3,717,470) | | | 3,945,509 | |
| | | | | |
| Real Estate Investment Trusts — 5.8% | | | | |
| | 95,244 | | Plum Creek Timber Co., Inc. | | | 4,545,044 | |
| | 84,753 | | W.P. Carey, Inc. | | | 5,000,427 | |
| Total Real Estate Investment Trusts (Cost $8,868,132) | | | 9,545,471 | |
| | | | | |
| Short-Term Investments — 3.8% | | | | |
| | | | | |
| Money Market Funds — 3.8% | | | | |
| | 6,194,219 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 6,194,219 | |
| Total Short-Term Investments (Cost $6,194,219) | | | 6,194,219 | |
| Total Investments — 99.8% (Cost $132,134,632) | | | 163,102,951 | |
| Other Assets in Excess of Liabilities — 0.2% | | | 346,874 | |
| NET ASSETS — 100.0% | | $ | 163,449,825 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Financials | 15.9% |
| Information Technology | 15.5% |
| Health Care | 14.0% |
| Consumer Discretionary | 13.2% |
| Consumer Staples | 12.8% |
| Industrials | 11.0% |
| Real Estate Investment Trusts | 5.8% |
| Energy | 4.3% |
| Money Market Funds | 3.8% |
| Preferred Stocks | 2.4% |
| Materials | 1.1% |
| Other Assets and Liabilities | 0.2% |
| | 100.0% |
ADR — American Depositary Receipt
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Sustainable Growth Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Sustainable Growth Fund Advisor Shares (the “Fund”) rose 4.98% in value. During the same period, the Russell 1000 Growth Index (the “Index”), the Fund’s benchmark, increased 1.64%.
For the six months ended December 31, 2015, we benefitted from strong stock selection and performance in our consumer discretionary sector names. The stock that contributed the most to performance was Amazon, which surged 56% during the period. Amazon’s ecommerce business continues to take share from traditional retailers and its cloud computing operation (Amazon Web Services) remains in hyper-growth mode while providing material contribution to Amazon’s operating income. Two other consumer names, Nike and Starbucks, reported impressive financial results during the period.
Performance in our health care sector companies also stood out during the six months ended December 31. Leading up to that period, we found an increasing number of new ideas within the sector that meet all three of our investment criteria: outstanding fundamentals, compelling valuation and Environmental Business Advantages (EBA™). The three health care companies added most recently—Alexion, Bristol Myers and Novo Nordisk—performed well and helped our overall performance. In addition, Thermo Fisher, which was added to the portfolio since January 2014, continued to deliver steady growth.
We added three new names to the portfolio during the period: American Tower, Hexcel Corporation and WhiteWave Foods Company.
Hexcel is a leading manufacturer of high-end carbon-fibers and composite materials used in aerospace, wind and industrial applications. We are attracted to the company’s wide competitive moat, multiyear backlog and strong relationships with its aerospace customers. In recent decades the aerospace industry has used increasing amounts of carbon fiber to build lighter, more fuel-efficient aircraft. We believe this trend will continue, with Hexcel a primary beneficiary.
We also initiated an investment in American Tower, one of the world’s largest builders of communication towers. The company’s business model has many attractive attributes, including high barriers to entry, stable organic growth and solid returns on capital. We believe American Tower’s strong focus on environmental compliance and its efforts to reduce customer fuel costs have helped enhance its growth rate, especially in international markets. Consequently, we believe the company’s EBA™ has helped it gain market share.
WhiteWave is a leading consumer packaged food and beverage company focused on high-growth product categories. The company manufactures, markets, distributes and sells branded plant-based foods and beverages, coffee creamers and beverages, and premium dairy products throughout North America and Europe. Each of the company’s brands have either the No. 1 or No. 2 market share position in its respective category. While the company is aligned with some of the fastest-growing categories in U.S. retail, the management team has proven its ability to acquire brands and grow them through new product introductions. WhiteWave’s EBA™ stems from its leadership in two food categories known for their sustainability benefits: organic dairy and plant-based foods and beverages.
We sold Praxair and Apple to make room for Hexcel and American Tower. We believe the growth rates for Hexcel and American Tower will exceed those for Praxair and Apple for the foreseeable future. Danaher completed the acquisition of Pall Corporation during the third quarter of 2015, reducing the total number of companies in the portfolio to 33. The addition of WhiteWave in the fourth quarter raised the total number of companies to 34.
We intend to move forward with our disciplined, repeatable formula for stock selection, which we believe has the potential to enable us to provide attractive long-term returns. Our long-term investment horizon allows us to identify and focus on companies that we believe exhibit the three tenets of our investment philosophy—strong fundamentals, sustainable competitive advantages including EBA™, and valuation discipline. 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, CFA
Portfolio Manager
David Powell, CFA
Portfolio Manager
Brown Advisory Sustainable Growth FundA Message to Our Shareholders
December 31, 2015
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 and medium-sized 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. 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.
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.
Brown Advisory Sustainable Growth FundSchedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 93.1% | | | |
| | | | |
| Consumer Discretionary — 16.3% | | | |
| | 23,596 | | Amazon.com, Inc.* | | | 15,948,300 | |
| | 6,020 | | Chipotle Mexican Grill, Inc.* | | | 2,888,697 | |
| | 51,950 | | Delphi Automotive PLC | | | 4,453,674 | |
| | 182,552 | | Nike, Inc. | | | 11,409,500 | |
| | 160,219 | | Starbucks Corp. | | | 9,617,947 | |
| | 85,062 | | TJX Companies, Inc. | | | 6,031,746 | |
| | | | | | | 50,349,864 | |
| Consumer Staples — 2.1% | | | | |
| | 164,006 | | WhiteWave Foods Co.* | | | 6,381,473 | |
| | | | | |
| Health Care — 18.6% | | | | |
| | 44,473 | | Alexion Pharmaceuticals, Inc.* | | | 8,483,225 | |
| | 183,620 | | Bristol-Myers Squibb Co. | | | 12,631,220 | |
| | 161,966 | | Cerner Corp.* | | | 9,745,494 | |
| | 111,862 | | IDEXX Laboratories, Inc.* | | | 8,156,977 | |
| | 101,083 | | Novo Nordisk A.S. | | | 5,870,901 | |
| | 89,625 | | Thermo Fisher Scientific, Inc. | | | 12,713,306 | |
| | | | | | | 57,601,123 | |
| Industrials — 27.0% | | | | |
| | 100,404 | | A. O. Smith Corp. | | | 7,691,950 | |
| | 43,016 | | Acuity Brands, Inc. | | | 10,057,141 | |
| | 122,834 | | Canadian National Railway Co. | | | 6,863,964 | |
| | 140,604 | | Danaher Corp. | | | 13,059,300 | |
| | 120,378 | | Hexcel Corp. | | | 5,591,558 | |
| | 64,294 | | J.B. Hunt Transport Services, Inc. | | | 4,716,608 | |
| | 49,231 | | Middleby Corp.* | | | 5,310,548 | |
| | 92,441 | | Stericycle, Inc.* | | | 11,148,385 | |
| | 154,198 | | Verisk Analytics, Inc.* | | | 11,854,742 | |
| | 102,928 | | Westinghouse Air Brake Technologies Corp. | | | 7,320,239 | |
| | | | | | | 83,614,435 | |
| Information Technology — 27.2% | | | | |
| | 84,927 | | Akamai Technologies, Inc.* | | | 4,469,708 | |
| | 12,923 | | Alphabet Inc. — Class A* | | | 10,054,223 | |
| | 3,267 | | Alphabet Inc. — Class C* | | | 2,479,261 | |
| | 137,205 | | Arm Holdings PLC ADR | | | 6,207,154 | |
| | 138,468 | | Facebook, Inc.* | | | 14,492,061 | |
| | 78,653 | | Intuit, Inc. | | | 7,590,014 | |
| | 87,586 | | NXP Semiconductors NV* | | | 7,379,121 | |
| | 103,996 | | salesforce.com, Inc.* | | | 8,153,286 | |
| | 143,808 | | TE Connectivity, Ltd. | | | 9,291,435 | |
| | 183,523 | | Visa, Inc. | | | 14,232,209 | |
| | | | | | | 84,348,472 | |
| Materials — 1.9% | | | | |
| | 50,979 | | Ecolab, Inc. | | | 5,830,978 | |
| Total Common Stocks (Cost $214,211,714) | | | 288,126,345 | |
| | | | | |
| Real Estate Investment Trusts — 3.1% | | | | |
| | 99,336 | | American Tower Corp. | | | 9,630,625 | |
| Total Real Estate Investment Trusts (Cost $9,396,885) | | | 9,630,625 | |
| | | | | | | | |
| Short-Term Investments — 4.2% | | | | |
| | | | | |
| Money Market Funds — 4.2% | | | | |
| | 12,994,885 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 12,994,885 | |
| Total Short-Term Investments (Cost $12,994,885) | | | 12,994,885 | |
| Total Investments — 100.4% (Cost $236,603,484) | | | 310,751,855 | |
| Liabilities in Excess of Other Assets — (0.4)% | | | (1,202,997 | ) |
| NET ASSETS — 100.0% | | $ | 309,548,858 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Information Technology | | | 27.2 | % |
| Industrials | | | 27.0 | % |
| Health Care | | | 18.6 | % |
| Consumer Discretionary | | | 16.3 | % |
| Money Market Funds | | | 4.2 | % |
| Real Estate Investment Trusts | | | 3.1 | % |
| Consumer Staples | | | 2.1 | % |
| Materials | | | 1.9 | % |
| Other Assets and Liabilities | | | (0.4 | )% |
| | | | 100.0 | % |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Small-Cap Growth FundA Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Small-Cap Growth Fund Investor Shares (the “Fund”) returned -1.17%. During the same period, the Russell 2000 Growth Index (the “Index”), the Fund’s benchmark, returned -9.31%.
Our top and bottom contributors for the year were spread across many sectors, with no particular sector driving performance on either side of the ledger. Waste Connections, a long time holding was our top performer over the six-month period. The company’s share price rose on solid earnings as well as an improved outlook. Dyax rose 42% on news that Shire Pharmaceuticals would be acquiring the company. Qunar Caymans Islands Limited ADR was another top performer, rising on the news that competitor, Ctrip, acquired a meaningful stake in the company.
There was no apparent theme to the detractors for the trailing six months. Interactive Intelligence was the largest detractor during the period. The company fell as it is transitioning its contact center software platform onto Amazon Web Services, a long term positive, but highly disruptive in the short term. The weakness in Ascent Capital Group’s stock price persisted after fundamentals of their home security company did not improve meaningfully. CEB Inc. shares fell after management reduced guidance for fiscal year 2015 because of $15 million in bookings that were pushed out of the second quarter.
We added a number of new holdings during the last six months, which is reflective of a healthy pipeline driven by a productive team effort. The recent additions replaced companies that were eliminated due to M&A activity, lower conviction in our original investment thesis or attainment of our long-term price objectives. The period turnover was relatively low, consistent with our history and in-line with our desire to be business owners and not stock traders.
We continue to build out the top of our idea funnel via hundreds of company management interactions per year. It is likely that the number of companies we know and understand deeply that we do not own has never been higher. Secondly, we continue to stress test the portfolio to ensure that our original investment theses remain intact and that we are incremental buyers over the long-term. And, third, we remain committed to driving a collaborative process that takes advantage of the breadth of knowledge across our entire research team and the robust investment network possessed by our firm. By focusing on these process elements, we are hopeful that we are not only positioned to do well in strong equity markets, but we are prepared to capitalize on opportunities and perform relatively well should more volatile markets lay ahead.
In sum, we have been heavily engaged in due diligence over the past year, conducting face-to-face meetings with the management teams of all of our portfolio companies along with hundreds of other companies that we are considering as potential investments for the portfolio. We seek companies that offer us the potential for growth (through large and/or growing end markets and a differentiated product, service or business model), the potential for sustainable results (through favorable competitive positioning and/or strong management), and the potential for value creation (through high or improving margins and capital efficiency.) We look to purchase these businesses at what we believe are attractive prices when we have a non-consensus view. We will maintain this discipline going forward as we strive for attractive risk-adjusted returns across the small-cap asset class.
Sincerely,
Christopher A. Berrier
Portfolio Manager
Brown Advisory Small-Cap Growth FundA Message to Our Shareholders
December 31, 2015
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. Earnings growth is not representative of the fund’s future performance. Diversification does not assure a profit, nor does it protect against a loss in a declining market. 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.
Brown Advisory Small-Cap Growth FundSchedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 96.2% | | | |
| | | | |
| Consumer Discretionary — 11.7% | | | |
| | 128,163 | | 2U, Inc.* | | | 3,586,001 | |
| | 61,157 | | Ascent Capital Group, Inc.* | | | 1,022,545 | |
| | 234,436 | | Black Diamond, Inc.* | | | 1,036,207 | |
| | 115,927 | | Bright Horizons Family Solutions, Inc.* | | | 7,743,924 | |
| | 12,217 | | CoStar Group, Inc.* | | | 2,525,132 | |
| | 167,612 | | Global Eagle Entertainment, Inc.* | | | 1,654,330 | |
| | 208,108 | | Liberty TripAdvisor Holdings, Inc.* | | | 6,313,997 | |
| | 175,583 | | Lindblad Expeditions Holdings, Inc.* | | | 1,950,727 | |
| | 49,992 | | Papa Johns International, Inc. | | | 2,793,053 | |
| | 50,575 | | Qunar Cayman Islands, Ltd. ADR* | | | 2,667,325 | |
| | | | | | | 31,293,241 | |
| Consumer Staples — 2.1% | | | | |
| | 26,549 | | PriceSmart, Inc. | | | 2,203,301 | |
| | 43,363 | | Treehouse Foods, Inc.* | | | 3,402,261 | |
| | | | | | | 5,605,562 | |
| Financials — 3.3% | | | | |
| | 150,894 | | ConnectOne Bancorp, Inc. | | | 2,820,209 | |
| | 60,883 | | Patriot National, Inc.* | | | 408,525 | |
| | 115,246 | | Prosperity Bancshares, Inc. | | | 5,515,673 | |
| | | | | | | 8,744,407 | |
| Health Care — 19.9% | | | | |
| | 50,013 | | Acceleron Pharma, Inc.* | | | 2,438,634 | |
| | 66,673 | | Alder Biopharmaceuticals, Inc.* | | | 2,202,209 | |
| | 58,857 | | Cardiovascular Systems, Inc.* | | | 889,918 | |
| | 87,875 | | Charles River Laboratories International, Inc.* | | | 7,064,271 | |
| | 37,948 | | Coherus BioSciences, Inc.* | | | 871,286 | |
| | 64,220 | | Diplomat Pharmacy, Inc.* | | | 2,197,608 | |
| | 118,191 | | Dyax Corp.* | | | 4,446,346 | |
| | 40,739 | | Henry Schein, Inc.* | | | 6,444,502 | |
| | 49,898 | | Heron Therapeutics, Inc.* | | | 1,332,277 | |
| | 71,248 | | IDEXX Laboratories, Inc.* | | | 5,195,404 | |
| | 23,705 | | Incyte Corp.* | | | 2,570,807 | |
| | 10,298 | | Laboratory Corp. of America Holdings* | | | 1,273,245 | |
| | 114,981 | | Medidata Solutions, Inc.* | | | 5,667,414 | |
| | 40,753 | | Neurocrine Biosciences, Inc.* | | | 2,305,397 | |
| | 94,432 | | Novadaq Technologies, Inc.* | | | 1,203,064 | |
| | 94,228 | | Omeros Corp.* | | | 1,482,207 | |
| | 26,437 | | Press Ganey Holdings, Inc.* | | | 834,087 | |
| | 141,018 | | Teladoc, Inc.* | | | 2,532,683 | |
| | 19,506 | | Ultragenyx Pharmaceutical, Inc.* | | | 2,188,183 | |
| | | | | | | 53,139,542 | |
| Industrials — 20.9% | | | | |
| | 104,846 | | Advisory Board Co.* | | | 5,201,410 | |
| | 56,502 | | CEB, Inc. | | | 3,468,658 | |
| | 92,339 | | DigitalGlobe, Inc.* | | | 1,446,029 | |
| | 110,619 | | ESCO Technologies, Inc. | | | 3,997,771 | |
| | 103,437 | | Healthcare Services Group, Inc. | | | 3,606,848 | |
| | 90,850 | | HEICO Corp. | | | 4,938,606 | |
| | 123,191 | | Hexcel Corp. | | | 5,722,222 | |
| | 52,349 | | IDEX Corp. | | | 4,010,457 | |
| | 153,469 | | Knight Transportation, Inc. | | | 3,718,554 | |
| | 20,976 | | Landstar System, Inc. | | | 1,230,242 | |
| | 75,922 | | Team, Inc.* | | | 2,426,467 | |
| | 204,881 | | Waste Connections, Inc. | | | 11,538,898 | |
| | 93,590 | | Woodward, Inc. | | | 4,647,679 | |
| | | | | | | 55,953,841 | |
| Information Technology — 34.8% | | | | |
| | 56,992 | | Aspen Technology, Inc.* | | | 2,152,018 | |
| | 89,582 | | Blackbaud, Inc. | | | 5,899,871 | |
| | 153,577 | | Broadridge Financial Solutions, Inc. | | | 8,251,692 | |
| | 212,986 | | BroadSoft, Inc.* | | | 7,531,185 | |
| | 55,784 | | Cavium, Inc.* | | | 3,665,567 | |
| | 108,778 | | CoreLogic, Inc.* | | | 3,683,223 | |
| | 62,448 | | Demandware, Inc.* | | | 3,370,319 | |
| | 94,128 | | Electronics For Imaging, Inc.* | | | 4,399,543 | |
| | 69,707 | | Envestnet, Inc.* | | | 2,080,754 | |
| | 27,084 | | Expedia, Inc. | | | 3,366,541 | |
| | 29,779 | | Fair Isaac Corp. | | | 2,804,586 | |
| | 211,056 | | Genpact, Ltd.* | | | 5,272,179 | |
| | 36,472 | | Global Payments, Inc. | | | 2,352,809 | |
| | 34,889 | | Guidewire Software, Inc.* | | | 2,098,922 | |
| | 196,643 | | Interactive Intelligence Group, Inc.* | | | 6,178,523 | |
| | 147,896 | | M/A-COM Technology | | | | |
| | | | Solutions Holdings, Inc.* | | | 6,047,467 | |
| | 68,208 | | MAXIMUS, Inc. | | | 3,836,700 | |
| | 133,074 | | Monotype Imaging Holdings, Inc. | | | 3,145,869 | |
| | 137,767 | | Pegasystems, Inc. | | | 3,788,593 | |
| | 21,247 | | SPS Commerce, Inc.* | | | 1,491,752 | |
| | 99,567 | | Synchronoss Technologies, Inc.* | | | 3,507,745 | |
| | 33,500 | | Ultimate Software Group, Inc.* | | | 6,549,585 | |
| | 14,743 | | WEX, Inc.* | | | 1,303,281 | |
| | | | | | | 92,778,724 | |
| Telecommunication Services — 3.5% | | | | |
| | 230,479 | | Cogent Communications Holdings, Inc. | | | 7,995,317 | |
| | 133,875 | | inContact, Inc.* | | | 1,277,167 | |
| | | | | | | 9,272,484 | |
| Total Common Stocks (Cost $185,715,824) | | | 256,787,801 | |
| | | | | |
| Private Placements — 1.0% | | | | |
| | 18,000 | | Greenspring Global Partners IV-B, L.P.*^† | | | 2,534,470 | |
| | 74,769 | | Greenspring Global Partners V-B, L.P.*~† | | | 117,786 | |
| Total Private Placements (Cost $621,615) | | | 2,652,256 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Small-Cap Growth FundSchedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Short-Term Investments — 2.9% | | | |
| | | | |
| Money Market Funds — 2.9% | | | |
| | 7,764,748 | | DWS Cash Account Trust — Government | | | |
| | | | & Agency Securities Portfolio — | | | |
| | | | Institutional Shares, 0.04%# | | | 7,764,748 | |
| Total Short-Term Investments (Cost $7,764,748) | | | 7,764,748 | |
| Total Investments — 100.1% (Cost $194,102,187) | | | 267,204,805 | |
| Liabilities in Excess of Other Assets — (0.1)% | | | (378,325 | ) |
| NET ASSETS — 100.0% | | $ | 266,826,480 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Information Technology | | | 34.8 | % |
| Industrials | | | 20.9 | % |
| Health Care | | | 19.9 | % |
| Consumer Discretionary | | | 11.7 | % |
| Telecommunication Services | | | 3.5 | % |
| Financials | | | 3.3 | % |
| Money Market Funds | | | 2.9 | % |
| Consumer Staples | | | 2.1 | % |
| Private Placements | | | 1.0 | % |
| Other Assets and Liabilities | | | (0.1 | )% |
| | | | 100.0 | % |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| ^ | Security is exempt from registration under Regulation D 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 February 2015 as part of a $2,000,000 capital commitment. At December 31, 2015, $1,800,000 of the capital commitment has been fulfilled by the Fund. |
| ~ | Security is exempt from registration under Regulation D 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 June 2015 as part of a $100,000 capital commitment. At December 31, 2015, $74,769 of the capital commitment has been fulfilled by the Fund. |
| † | All or a portion of this security is considered illiquid. At December 31, 2015, the total market value of securities considered illiquid was 2,652,256 or 1.0% of net assets. |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Small-Cap Fundamental Value Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Small-Cap Fundamental Value Fund Investor Shares (the “Fund”) declined 5.66% in value. During the same period, the Russell 2000 Value Index (the “Index”), the Fund’s benchmark, decreased 8.17%
Core-Mark was the Fund’s largest individual contributor to performance during the six month period. Core-Mark appreciated on strong business fundamentals as well as the announcement of an 800-store distribution agreement with Rite-Aid, opening up a significant new market opportunity. Rite-Aid’s current footprint stands at over 4,600 stores and opens up a potentially large addressable market opportunity within the drugstore space going forward. StanCorp Financial Group was another top performer. The company announced its sale to Mejida Yasuda, a Japanese life insurance company, for a 50% premium in an all-cash transaction. Lastly, TFS Financial was a strong contributor to performance. The company gained on solid quarterly results throughout the period, in addition to being a strong returner of capital to shareholders through consistent dividends and buybacks.
The largest detractor from performance was NorthStar Asset Management (NSAM). The company fell during the period for a few reasons. A midyear proposal by the Department of Labor sparked fears that the company’s nontraded REIT business would decline on regulatory pressures. Suppressed equity issuance at NorthStar Realty Finance Corp (NRF), as a result of stock weakness, tempered expectations about the growth in asset management fees that NSAM would earn from NRF. (NRF is a publically traded commercial finance company and NSAM’s largest client.) Lastly, NSAM was susceptible to multiple compression within the alternative asset management industry. While fundamentals have remained resilient for Archrock’s (AROC) gas compression business, the stock was down materially in the fourth quarter because of a combination of weakening U.S. natural gas prices and the declining unit price of Archrock Partners (APLP), which accounts for nearly half of AROC’s total enterprise value today. The market is concerned that Archrock Partners will cut its distribution, which in turn may reduce the cash distribution to Archrock as APLP’s general partner. Ascent Capital Group declined on poor results during the year and concerns over increased competition in the U.S. home security market.
The Fund added eight companies during the six month period. Sizable additions included Liberty Global plc LiLAC Group Class C, Murphy USA and Par Pacific Holdings. Liberty Global plc LiLAC Class C (LILAK), a tracking stock spun from Liberty Global, operates the incumbent cable companies in Chile and Puerto Rico, two markets where broadband penetration is well below US levels and growing. Liberty is in a position to benefit from increasing penetration in both markets as it is the speed and bundling leader in Chile and has consolidated the market in Puerto Rico, with its Onelink purchase in 2012 and recent acquisition of Choice this year. Further, with a fragmented market, LILAK has an opportunity to participate in Latin American cable growth beyond Chile and PR through M&A in other key geographies. Given these dynamics, at less than nine times EBITDA, the average of the US/European cable/sat peers today, we believe the risk reward is attractive.
Murphy USA (MUSA) is one of the largest independent retailers of motor fuel and convenience merchandise in the U.S. The company sells its retail and motor fuel products and convenience merchandise through a large chain of over 1,200 retail locations, all of which are adjacent or in close proximity (less than 3 miles) to a Wal-Mart store. MUSA is positioned as the low cost, high volume fuel retailer that is able to leverage its below industry average breakeven fuel margin through a unique cost advantaged fuel supply structure that stems from its origination out of Murphy Oil Corporation. Due to recent volatility in the energy markets, MUSA’s stock has traded off more than 30% since March 2015 and we believe the current valuation, (less than seven times EBITDA), presents a favorable risk/reward opportunity to own a well-run convenient store/fuel distributor. Further, the company has a strong balance sheet and a management team that is dedicated to using capital in a disciplined manner. The company recently initiated a $250 million share repurchase program and bought back $150 million of stock in the most recent quarter.
Par Pacific Holdings (PARR) is an $800 million market-cap energy company with roughly $1.4 billion in federal net operating loss (NOL) carryforwards. Since reorganizing in April 2012, the company has built a formidable and integrated refining, logistics and retail fuel distribution system of businesses in Hawaii through two savvy acquisitions for less than three times EBITDA in total. The company currently owns the largest refinery in Hawaii, 128 retail fuel distribution sites and related logistics assets. PARR intends to accelerate its NOL burn-rate through additional acquisitions in the North American energy sector. Based on our analysis of the company’s assets—including its real estate and NOLs at current burn rate—we believe we paid almost nothing for PARR’s refinery, a business that has generated $67 million in EBITDA in just the past three quarters. While we expect that the refinery’s operating performance will probably be volatile, the company’s retail and logistics businesses should help stabilize cash flow.
Brown Advisory Small-Cap Fundamental Value FundA Message to Our Shareholders
December 31, 2015
Over the six month period there were five deletions from the Small Cap Fundamental Value Fund. We sold Bristow Group because we grew concerned that lower oil prices put the company at increased risk of contract renegotiations prompted by customers seeking to cut costs. We sold our holding in MTS Systems during the third quarter because of its increasing reliance for growth on its business in China. We eliminated our remaining position in Starz because we believed the share price was already reflecting the upside from a potential merger with Lionsgate or another third party, without factoring in the risk that a deal might not happen. We did not like the risk/reward scenario and decided to eliminate the remaining position. Horizon Global Corp. was a small position that was obtained through its spin-off from TriMas Group at the end of the second quarter. After meeting with the new management team early in the third quarter, we decided to exit the position because of concerns about the company’s approach to capital allocation. Exterran Holdings Inc. was renamed Archrock Inc. following the spinoff of its international fabrication business, which took the name Exterran Corp. Our intent has always been to sell this part of the investment, and we did so upon completion of the spinoff.
Given the broader market environment, we are still concerned about macro factors affecting small-cap stocks, including moves in currencies and commodities. However, recent market volatility has created a number of investment opportunities that were not present at the beginning of the year, as performance has been dispersed both among sectors and individual companies. This has led to a number of recent investments as well as a full pipeline of opportunities that we are pursuing.
Sincerely,
J. David Schuster
Portfolio Manager
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. These risks are greater for investments in emerging 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.
Brown Advisory Small-Cap Fundamental Value Fund
Schedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 94.3% | | | |
| | | | |
| Consumer Discretionary — 16.4% | | | |
| | 229,168 | | Ascent Capital Group, Inc.* | | | 3,831,689 | |
| | 366,670 | | Cato Corp. | | | 13,500,789 | |
| | 348,304 | | Core-Mark Holding Co., Inc. | | | 28,540,030 | |
| | 232,646 | | Culp, Inc. | | | 5,925,494 | |
| | 1,754,172 | | Denny’s Corp.* | | | 17,243,511 | |
| | 617,676 | | Destination Maternity Corp. | | | 5,386,135 | |
| | 977,312 | | Diamond Resorts International, Inc.* | | | 24,931,229 | |
| | 367,386 | | Liberty Global PLC LiLAC Group* | | | 15,797,598 | |
| | 385,183 | | Murphy USA, Inc.* | | | 23,396,015 | |
| | | | | | | 138,552,490 | |
| Consumer Staples — 1.6% | | | | |
| | 108,434 | | Casey’s General Stores, Inc. | | | 13,060,875 | |
| | | | | |
| Energy — 3.7% | | | | |
| | 638,462 | | Archrock, Inc. | | | 4,801,234 | |
| | 164,074 | | Green Plains Partners LP | | | 2,666,202 | |
| | 664,859 | | Par Pacific Holdings, Inc.* | | | 15,650,781 | |
| | 387,807 | | RigNet, Inc.* | | | 8,023,727 | |
| | | | | | | 31,141,944 | |
| Financials — 35.1% | | | | |
| | 2,707,226 | | American Capital, Ltd.* | | | 37,332,647 | |
| | 198,199 | | American Equity Investment Life Holding Co. | | | 4,762,722 | |
| | 280,354 | | Assurant, Inc. | | | 22,579,711 | |
| | 785,440 | | Cash America International, Inc. | | | 23,523,928 | |
| | 141,165 | | Farmers Capital Bank Corp.*† | | | 3,826,983 | |
| | 1,123,551 | | Forest City Enterprises, Inc.* | | | 24,639,473 | |
| | 524,326 | | Maiden Holdings, Ltd. | | | 7,817,701 | |
| | 367,386 | | Medley Management, Inc.† | | | 2,090,426 | |
| | 449,423 | | National General Holdings Corp. | | | 9,824,387 | |
| | 1,407,472 | | NorthStar Asset Management Group, Inc. | | | 17,086,710 | |
| | 334,150 | | OceanFirst Financial Corp. | | | 6,693,025 | |
| | 795,402 | | Oritani Financial Corp. | | | 13,124,133 | |
| | 313,880 | | Pacific Premier Bancorp, Inc.* | | | 6,669,950 | |
| | 318,164 | | Patriot National, Inc.* | | | 2,134,880 | |
| | 257,327 | | Primerica, Inc. | | | 12,153,554 | |
| | 314,597 | | Renasant Corp. | | | 10,825,283 | |
| | 147,110 | | StanCorp Financial Group, Inc. | | | 16,752,887 | |
| | 1,038,922 | | Synovus Financial Corp. | | | 33,640,294 | |
| | 2,105,146 | | TFS Financial Corp.† | | | 39,639,899 | |
| | 89,260 | | Triumph Bancorp, Inc.* | | | 1,472,790 | |
| | | | | | | 296,591,383 | |
| Health Care — 3.5% | | | | |
| | 151,945 | | Addus HomeCare Corp.* | | | 3,537,280 | |
| | 527,893 | | Air Methods Corp.* | | | 22,134,553 | |
| | 88,873 | | Providence Service Corp.* | | | 4,169,921 | |
| | | | | | | 29,841,754 | |
| Industrials — 12.6% | | | | |
| | 884,573 | | Albany International Corp.† | | | 32,331,143 | |
| | 525,038 | | DigitalGlobe, Inc.* | | | 8,222,095 | |
| | 379,601 | | EnPro Industries, Inc. | | | 16,641,708 | |
| | 913,110 | | Federal Signal Corp. | | | 14,472,794 | |
| | 389,267 | | Kadant, Inc. | | | 15,808,133 | |
| | 598,513 | | McGrath RentCorp | | | 15,076,542 | |
| | 203,901 | | Thermon Group Holdings, Inc.* | | | 3,450,005 | |
| | | | | | | 106,002,420 | |
| Information Technology — 10.2% | | | | |
| | 439,130 | | Broadridge Financial Solutions, Inc. | | | 23,594,455 | |
| | 133,745 | | CoreLogic, Inc.* | | | 4,528,606 | |
| | 866,743 | | CTS Corp.† | | | 15,289,347 | |
| | 67,769 | | DST Systems, Inc. | | | 7,729,732 | |
| | 624,194 | | EchoStar Corp.* | | | 24,412,227 | |
| | 360,963 | | Electro Rent Corp.† | | | 3,320,860 | |
| | 131,262 | | MAXIMUS, Inc. | | | 7,383,487 | |
| | | | | | | 86,258,714 | |
| Materials — 8.2% | | | | |
| | 405,191 | | Clearwater Paper Corp.* | | | 18,448,346 | |
| | 285,349 | | Deltic Timber Corp.† | | | 16,798,496 | |
| | 144,256 | | Innophos Holdings, Inc. | | | 4,180,539 | |
| | 184,471 | | KMG Chemicals, Inc. | | | 4,246,522 | |
| | 414,746 | | Neenah Paper, Inc. | | | 25,892,593 | |
| | | | | | | 69,566,496 | |
| Telecommunication Services — 3.0% | | | | |
| | 321,015 | | Atlantic Tele-Network, Inc. | | | 25,113,004 | |
| Total Common Stocks (Cost $717,081,912) | | | 796,129,080 | |
| | | | | |
| Real Estate Investment Trusts — 3.0% | | | | |
| | 801,841 | | Campus Crest Communities, Inc.* | | | 5,452,519 | |
| | 2,949,771 | | MFA Financial, Inc. | | | 19,468,488 | |
| Total Real Estate Investment Trusts (Cost $27,872,125) | | | 24,921,007 | |
| | | | | |
| Short-Term Investments — 2.4% | | | | |
| | | | | |
| Money Market Funds — 2.4% | | | | |
| | 20,504,913 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 20,504,913 | |
| Total Short-Term Investments (Cost $20,504,913) | | | 20,504,913 | |
| Total Investments — 99.7% (Cost $765,458,950) | | | 841,555,000 | |
| Other Assets in Excess of Liabilities — 0.3% | | | 2,924,091 | |
| NET ASSETS — 100.0% | | $ | 844,479,091 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Financials | 35.1% |
| Consumer Discretionary | 16.4% |
| Industrials | 12.6% |
| Information Technology | 10.2% |
| Materials | 8.2% |
| Energy | 3.7% |
| Health Care | 3.5% |
| Telecommunication Services | 3.0% |
| Real Estate Investment Trusts | 3.0% |
| Money Market Funds | 2.4% |
| Consumer Staples | 1.6% |
| Other Assets and Liabilities | 0.3% |
| | 100.0% |
| * | Non-Income Producing |
| † | All or a portion of this security is considered illiquid. At December 31, 2015 the total market value of securities considered illiquid was $8,449,340 or 1.0% of net assets. |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Multi-Strategy Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Multi-Strategy Fund (the “Fund”) decreased 2.83% in value. During the same period, the S&P Balanced Equity and Bond – Moderate Index, the Fund’s benchmark, increased 1.05%.
For the six months ended December 31, 2015, financial markets were hit by renewed fears around China’s slowing economy and a further decrease in oil prices. Overall, market performance ended flat or negative for the year, with only Large-Cap U.S. equities and Investment Grade fixed income producing small, positive returns. The High Yield market was hit especially hard, as concerns about liquidity within the High Yield market further exacerbated a market selloff. However, we believe this selloff in High Yield may present an attractive opportunity in 2016.
The largest contributor to performance on a relative basis was the Brown Advisory – WMC Strategic European Equity Fund, which declined 0.13% (versus -6.42% for the MSCI Europe Index). The relative outperformance of the Brown Advisory WMC Strategic European Equity Fund was driven by a combination of strong stock selection and sector allocation. Overweight exposure to the industrial sector (as a result of stock selection) and underweight exposure to energy and materials positively impacted the portfolio. The Brown Advisory – WMC Strategic European Equity Fund has carefully monitored the tradeoff between valuation and quality within its portfolio and plans to adjust accordingly if valuations do not support the structural growth expectations of individual companies.
The largest detractor to performance on a relative basis was the Brown Advisory Flexible Equity Fund, which decreased 2.38% in value (versus a 0.15% increase for the S&P 500 Index). The underperformance was mostly due to an overweight exposure to energy, as oil prices continued to fall during the second half of the year. In addition, the Brown Advisory Flexible Equity Fund is the largest underlying holding, constituting 31% of the Fund as of December 31, 2015.
Overall, macroeconomic concerns around China’s slowing growth rate and falling oil prices produced significant volatility and minimal returns in 2015, and it is possible that these conditions could continue into 2016. Additionally, diverging central bank policies are producing cross-currents that are having considerable impact across financial markets. However, we remain dedicated to a long-term perspective comparing a range of scenarios to determine what we believe is the best risk-adjusted return potential across the investment landscape. We see the tradeoff of return potential to risk as fairly even between stocks and bonds but more favorable in Emerging Markets and High Yield. Although there are near-term risks in these asset classes, the recent selloff in both markets have created what we believe is an attractive entry point and we believe the longer-term risk/ reward balance may be quite favorable. Given this challenging environment, we have confidence in the potential for our underlying managers to add value and, more importantly, take advantage of opportunities going forward.
Sincerely,
Paul Chew, CFA
Portfolio Manager
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.
Brown Advisory Multi-Strategy Fund
Schedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Affiliated Mutual Funds (Note 3) — 96.7% | | | |
| | | | |
| Domestic Equity Funds — 41.9% | | | |
| | 59,096 | | Brown Advisory Flexible Equity Fund — | | | |
| | | | Institutional Shares | | | 911,857 | |
| | 9,401 | | Brown Advisory Small-Cap | | | | |
| | | | Fundamental Value Fund — | | | | |
| | | | Institutional Shares | | | 204,278 | |
| | 3,938 | | Brown Advisory Small-Cap Growth Fund — | | | | |
| | | | Institutional Shares | | | 119,594 | |
| | | | | | | 1,235,729 | |
| Foreign Equity Funds — 18.3% | | | | |
| | 18,212 | | Brown Advisory — Somerset Emerging | | | | |
| | | | Markets Fund — Institutional Shares | | | 150,245 | |
| | 26,254 | | Brown Advisory — WMC Strategic | | | | |
| | | | European Equity Fund — Institutional Shares | | | 266,737 | |
| | 12,616 | | Brown Advisory Emerging | | | | |
| | | | Markets Small-Cap Fund — | | | | |
| | | | Institutional Shares | | | 122,878 | |
| | | | | | | 539,860 | |
| Bond Funds — 36.5% | | | | |
| | 31,024 | | Brown Advisory Strategic Bond Fund — | | | | |
| | | | Investor Shares | | | 291,005 | |
| | 80,666 | | Brown Advisory Total Return Fund — | | | | |
| | | | Institutional Shares | | | 788,102 | |
| | | | | | | 1,079,107 | |
| Total Affiliated Mutual Funds (Cost $2,952,443) | | | 2,854,696 | |
| | | | | |
| Short-Term Investments — 2.9% | | | | |
| | | | | |
| Money Market Funds — 2.9% | | | | |
| | 85,969 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 85,969 | |
| Total Short-Term Investments (Cost $85,969) | | | 85,969 | |
| Total Investments — 99.6% (Cost $3,038,412) | | | 2,940,665 | |
| Other Assets in Excess of Liabilities — 0.4% | | | 10,741 | |
| NET ASSETS — 100.0% | | $ | 2,951,406 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Domestic Equity Funds | 41.9% |
| Bond Funds | 36.5% |
| Foreign Equity Funds | 18.3% |
| Money Market Funds | 2.9% |
| Other Assets and Liabilities | 0.4% |
| | 100.0% |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Global Leaders Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
The Brown Advisory Global Leaders Fund (the “Fund”) commenced operations on July 1, 2015. For the period from July 1, 2015 to December 31, 2015, the Fund declined 1.10% in value. During the same period, the Russell Global Large Cap Index, the Fund’s benchmark, decreased 5.40%.
During the period, stock prices fell globally, particularly within the energy and materials sectors. Performance was driven by stock picking within key overweight sectors (consumer discretionary and technology), stock selection within materials and our zero energy exposure.
During the second half of 2015, the focus of global investors shifted from Greece during the summer to China during the third quarter to the U.S. by year end. In the middle of the year, we saw a trend of improving European fundamentals while the outlook weakened across the emerging world. In China, Russia and Brazil, sectors including autos, industrials, consumer, commodity exporters and even smartphones makers all saw worse-than-expected results during the summer. During the third quarter, China’s stock market rout and renminbi devaluation spooked global investors, especially in conjunction with a rapid slowdown in many Chinese fundamental indicators. During the fourth quarter, industrials companies continued to see a weakening environment globally but technology, consumer and health care end-markets mostly held up. Supply-side capacity additions in China during the past decade have put many segments within Industrials into structural oversupply, not to mention many parts within materials too. It is difficult to see any quick fixes. We remain overweight consumer and technology sectors as we have done since launch and continue to struggle to find interesting ideas within energy.
From an individual stock perspective, the top three contributors to performance during the second half were United Internet in Germany, Alphabet (a.k.a. Google) and Facebook. The bottom three detractors were Credit Suisse, Burberry in the U.K. and MTN Group in South Africa. Over the six months we added three new positions and exited three, excluding the Opportunity fund program trade below, leaving the Fund with 37 positions at yearend. We added Alphabet (Google) in July, Estee Lauder in October and began to add Brown-Forman during December. We exited MTN Group in South Africa in August, OMRON in Japan during November and Burberry in December. We merged the Opportunity Fund into Global Leaders during the second half of 2015. Many of the positions were common holdings and retained but we executed a program trade to align other securities.
Alphabet has terrific economics and a world class moat. It delivers personalized customer outcomes that were impossible just 10 years ago. However, we wondered about management’s focus. Unbridled and undisclosed spending on R&D and CAPEX—with $11 billion spent on CAPEX in 2014 compared with $3 billion in 2012—alongside unknown investment in “moon-shot” projects gave us cause for concern. When the company announced the recruitment of CFO Ruth Porat from Morgan Stanley, where she had a reputation for cost control, our interest intensified but we decided to wait until we had evidence that this was truly a change. After the company reported in late July, we heard for the first time that cost control, capital allocation and more disclosure would be forthcoming. We waited for a pull-back in the stock and built a position. Alphabet has a Return on Invested Capital (“ROIC”) above 20%, with potential for double-digit revenue growth many years out and a valuation that, given these characteristics, was not expensive in our view.
Estee Lauder is one of the leading premium cosmetics company globally and it has transformed itself from cozy family management in 2008 into a 20% ROIC company delivering products that elicit strong customer loyalty. We initially balked at the valuation when launching Global Leaders, as consistent growth of about 6% just didn’t give enough upside. However, after meeting the CFO and attending a presentation from the CEO, we believe the ROIC can improve to 25% during the next three to five years—largely because of continuing the current strategy and some internal self-help measures from a new CFO hired to drive working capital efficiency.
Brown-Forman is the maker of Jack Daniels whiskey in the U.S. It sells good quality whiskey at a relatively inexpensive price within the category and reinvests heavily to maintain its aspirational brand status. While we see the rise of craft, particularly flavored, whiskeys, this is not detrimental to Jack Daniels status and the release of “honey” and “fire” liquors have been additive to the brand. Brown-Forman had underperformed the S&P 500 Index since the third quarter 2015 when it slightly missed sales estimates. This gave us an opportunity to invest in a high ROIC company with steady but not spectacular growth that had sold off to a reasonable price.
Brown Advisory Global Leaders FundA Message to Our Shareholders
December 31, 2015
We parted with MTN Group during July and August. While we still see the long-term opportunity for mobile phones to transform lives across Africa, we became very uncomfortable with our ability to predict both the business transition and, in particular, the foreign currency risk within the stock. The rise of mobile data is a shot in the arm for MTN and its customers as they first experience the Internet. MTN generates 45% of group EBIT in Nigeria and needs to repatriate this cash in order to service both debt and its dividend in U.S. dollars. After the Central Bank of Nigeria introduced capital controls in the middle of 2015, we struggled to determine what probabilities to attach to future scenarios. Hence we decided to play it safe and exit.
We exited OMRON in Japan during November. This is a position which we had not been adding to from inflows for some time, and it had been diluted down to a near 1% holding. After a detailed stock review we decide to exit. OMRON management has spent the best part of five years focused on a strategy to increase ROIC, which had lifted from 5% on a path to a 20% goal. However, recently emphasis has changed to revenue growth. ROIC continue to be one of management’s main performance indicators but the new strategy requires capital investment now, in some cyclical subsectors, with ROIC stalling at 14% for some time. While increasing growth ought to add to shareholder returns, we no longer see a company on a pathway to 20% and therefore look elsewhere.
We had also not added to Burberry using inflows for some time. It too had been diluted down to a near 1% holding. After reviewing the key drivers, particularly incremental return on capital, we decided to exit. While we continue to like Burberry’s clear lead online in luxury and digital marketing, incremental CAPEX investments are almost all dilutive to ROIC. We had noted the falling return on incremental capital previously but believed it was temporary because of sales growth pressure from China. Actually, management expects these new investments to deliver lower ROIC over time. Given management’s performance targets don’t measure ROIC, there is a clear incentive for management to trade ROIC for growth. In a time of slowing luxury sales in Greater China—the largest end market—this left us with an outlook and, more importantly, management incentives that we felt were not favorable over the next couple of years.
The Global Leaders Fund invests in market-leading companies from across the globe which we believe deliver superior customer outcomes. These businesses delight their clients, often by serving them in a unique way, and customers simply want to do business with them—more often than not returning again and again. We believe that companies that combine a superior outcome for their customers with strong leadership can generate high and sustainable ROIC, which may lead to outstanding shareholder returns. While “the customer comes first” is a lesson for all businesses, in statistical terms it is a “necessary but not sufficient condition.” Shareholders must share in the customers’ goodwill too. This “win-win,” first for customers and ultimately for shareholders, is paramount but not easily achieved. The stocks such as United Internet and Alphabet which have driven performance during the second half of 2015 all clearly deliver something which customers value.
Companies producing a ROIC of 20% or above have a two-thirds chance of still generating a ROIC of 20% or above in 10 years’ time. This is an outcome of delivering a superior customer experience. It’s also a great guide to the future. In theory, companies generating an excess economic return, such as a high ROIC, will have it competed away. In practice, the persistence of returns at high-ROIC companies underpins our investment strategy. If management’s strategy is sustainable, a persistently high ROIC is often underpriced by investors as they assume it fades to average too quickly. This only shows by compounding the excess economic return (ROIC less the weighted average cost of capital (“WACC”)) over time. Therefore we aim to invest with a three-to-five year holding period. Our annualized turnover by number of names is running at about 20% per annum, which fits neatly with our desired long-term focus.
Sincerely,
Michael Dillon, CFA
Portfolio Manager
Brown Advisory Global Leaders FundA Message to Our Shareholders
December 31, 2015
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.
Brown Advisory Global Leaders Fund
Schedule of Investments
December 31, 2015 (Unaudited)
Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 88.9% | | | |
| | | | |
| China — 2.6% | | | |
| | 81,734 | | AIA Group, Ltd. | | | 488,367 | |
| | | | | |
| Denmark — 3.3% | | | | |
| | 6,252 | | Novo Nordsik A/S | | | 361,979 | |
| | 4,457 | | Novo Nordisk A/S ADR | | | 258,863 | |
| | | | | | | 620,842 | |
| Germany — 2.6% | | | | |
| | 9,126 | | United Internet AG | | | 501,742 | |
| | | | | |
| Indonesia — 1.0% | | | | |
| | 229,455 | | Bank Rakyat Indonesia Persero | | | 188,314 | |
| | | | | |
| Japan — 2.6% | | | | |
| | 11,800 | | Fuji Heavy Industries, Ltd. | | | 486,116 | |
| | | | | |
| Sweden — 0.9% | | | | |
| | 7,150 | | Atlas Copco AB | | | 164,381 | |
| | | | | |
| Switzerland — 0.6% | | | | |
| | 5,611 | | Credit Suisse Group AG | | | 120,872 | |
| | | | | |
| Taiwan — 3.1% | | | | |
| | 25,965 | | Taiwan Semiconductor | | | | |
| | | | Manufacturing Co., Ltd. ADR | | | 590,703 | |
| | | | | |
| United Kingdom — 5.6% | | | | |
| | 4,693 | | Next PLC | | | 503,894 | |
| | 7,626 | | Unilever PLC | | | 327,098 | |
| | 5,790 | | Unilever PLC ADR | | | 249,665 | |
| | | | | | | 1,080,657 | |
| | | | | |
| United States — 66.6% | | | | |
| | | | | |
| Consumer Discretionary — 11.6% | | | | |
| | 9,475 | | Nike, Inc. | | | 592,188 | |
| | 459 | | Priceline Group, Inc.* | | | 585,202 | |
| | 8,637 | | Starbucks Corp. | | | 518,479 | |
| | 7,312 | | TJX Companies, Inc. | | | 518,494 | |
| | | | | | | 2,214,363 | |
| Consumer Staples — 6.2% | | | | |
| | 1,866 | | Brown Forman Corp. | | | 185,256 | |
| | 6,791 | | Estee Lauder Companies, Inc. | | | 598,015 | |
| | 4,474 | | Hershey Co. | | | 399,394 | |
| | | | | | | 1,182,665 | |
| Financials — 10.1% | | | | |
| | 4,267 | | Ameriprise Financial, Inc. | | | 454,094 | |
| | 17,095 | | Charles Schwab Corp. | | | 562,938 | |
| | 7,119 | | JPMorgan Chase & Co. | | | 470,068 | |
| | 4,334 | | Moody’s Corp. | | | 434,874 | |
| | | | | | | 1,921,974 | |
| Health Care — 9.1% | | | | |
| | 2,535 | | Alexion Pharmaceuticals, Inc.* | | | 483,551 | |
| | 3,342 | | Cigna Corp. | | | 489,035 | |
| | 2,700 | | DaVita HealthCare Partners, Inc.* | | | 188,217 | |
| | 7,214 | | Edwards Lifesciences Corp.* | | | 569,762 | |
| | | | | | | 1,730,565 | |
| Industrials — 3.8% | | | | |
| | 2,412 | | 3M Co. | | | 363,343 | |
| | 2,337 | | Verisk Analytics, Inc.* | | | 179,669 | |
| | 1,793 | | WABCO Holdings, Inc.* | | | 183,353 | |
| | | | | | | 726,365 | |
| Information Technology — 20.2% | | | | |
| | 882 | | Alphabet Inc.* | | | 669,332 | |
| | 4,065 | | Apple, Inc. | | | 427,882 | |
| | 10,145 | | Cognizant Technology Solutions Corp.* | | | 608,903 | |
| | 5,289 | | Facebook, Inc.* | | | 553,547 | |
| | 6,037 | | MasterCard, Inc. | | | 587,762 | |
| | 4,866 | | NXP Semiconductors NV* | | | 409,961 | |
| | 7,643 | | Visa, Inc. | | | 592,715 | |
| | | | | | | 3,850,102 | |
| Materials — 5.6% | | | | |
| | 4,222 | | Ecolab, Inc. | | | 482,912 | |
| | 2,222 | | Sherwin-Williams Co. | | | 576,832 | |
| | | | | | | 1,059,744 | |
| | | | | | | 12,685,778 | |
| Total Common Stocks (Cost $16,157,670) | | | 16,927,772 | |
| | | | | |
| Short-Term Investments — 11.7% | | | | |
| | | | | |
| Money Market Funds — 11.7% | | | | |
| | 2,229,379 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 2,229,379 | |
| Total Short-Term Investments (Cost $2,229,379) | | | 2,229,379 | |
| Total Investments — 100.6% (Cost $18,387,049) | | | 19,157,151 | |
| Liabilities in Excess of Other Assets — (0.6)% | | | (109,217 | ) |
| NET ASSETS — 100.0% | | $ | 19,047,934 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Information Technology | 26.0% |
| Consumer Discretionary | 16.8% |
| Financials | 14.3% |
| Health Care | 12.3% |
| Money Market Funds | 11.7% |
| Consumer Staples | 9.2% |
| Materials | 5.6% |
| Industrials | 4.7% |
| Other Assets and Liabilities | (0.6)% |
| | 100.0% |
ADR — American Depositary Receipt
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Intermediate Income Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
For the quarter ended December 31, 2015, the Brown Advisory Intermediate Income Fund Investor Shares (the “Fund”) fell 0.38% compared with the 0.51% decline in the Fund’s benchmark, the Barclays Intermediate US Aggregate Bond Index (the “Index”). During the final six months of 2015, the Fund rose 0.41% while the benchmark increased 0.57%.
Credit selection was the biggest positive contributor during the quarter. The corporate bond market was generally weighed down by poor performance from energy and other highly cyclical sectors. We were overweight corporates during the quarter, but our individual selections outperformed, resulting in overall corporate performance around 0.20% better than the Index. Highlights include Morgan Stanley, Janus Capital, JB Hunt and Columbia Properties Trust.
Our overweight in mortgage-backed securities (“MBS”) was also a positive contributor, as this sector outperformed Treasuries, in which we were underweight, by about 0.60%. Within MBS, we performed in-line with our benchmark.
The balance of the outperformance came from tax-free municipal bonds, which we have owned as a high-quality diversifier. As investor demand has returned to that market, we have been selectively selling into strong pricing.
We are agnostic on how Federal Reserve policy will evolve in 2016. The central bank’s vacillation on the timing of its first interest rate increase since 2006 damaged its credibility, as evidenced by the wide disparity between market expectations for 2016 hikes (two) and the Federal Reserve’s own projections (four or five). But the macro picture remains murky, particularly in regards to inflation. Classically, inflation picks up as unemployment falls below “full employment,” which is probably very close to where we are now. But the strong dollar, falling energy prices and weak demand from overseas are restraining inflation. How exactly those countervailing forces interact is difficult to say.
We expect income generation to be the key to fixed income returns in 2016. During this time of increased volatility, 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. Diversification does not assure a profit, nor does it protect against a 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.
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Corporate Bonds & Notes — 25.9% | | | | | | | | |
| | 1,520,000 | | 21st Century Fox America, Inc. | | 3.00 | % | | 09/15/2022 | | | 1,500,094 | |
| | 1,525,000 | | American Express Credit Corp.# | | 0.85 | % | | 08/15/2019 | | | 1,493,202 | |
| | 1,548,000 | | BB&T Corp.# | | 1.04 | % | | 01/15/2020 | | | 1,536,136 | |
| | 1,515,000 | | Bed Bath & Beyond, Inc. | | 3.75 | % | | 08/01/2024 | | | 1,480,400 | |
| | 1,483,000 | | Canadian National Resources Ltd. | | 5.70 | % | | 05/15/2017 | | | 1,515,169 | |
| | 1,521,000 | | CC Holdings GS V LLC/Crown Castle GS III Corp. | | 3.85 | % | | 04/15/2023 | | | 1,495,076 | |
| | 1,590,000 | | Columbia Property Trust Operating Partnership L.P. | | 4.15 | % | | 04/01/2025 | | | 1,575,191 | |
| | 1,610,000 | | Education Realty Operating Partnership L.P. | | 4.60 | % | | 12/01/2024 | | | 1,591,347 | |
| | 1,375,000 | | Exelis, Inc. | | 5.55 | % | | 10/01/2021 | | | 1,509,688 | |
| | 1,485,000 | | First American Financial Corp. | | 4.60 | % | | 11/15/2024 | | | 1,506,102 | |
| | 1,510,000 | | FMC Technologies, Inc. | | 2.00 | % | | 10/01/2017 | | | 1,487,087 | |
| | 1,495,000 | | Healthcare Trust of America, Inc. | | 3.38 | % | | 07/15/2021 | | | 1,475,481 | |
| | 1,615,000 | | Janus Capital Group, Inc. | | 4.88 | % | | 08/01/2025 | | | 1,660,414 | |
| | 1,490,000 | | JB Hunt Transport Services, Inc. | | 2.40 | % | | 03/15/2019 | | | 1,500,476 | |
| | 1,530,000 | | Morgan Stanley | | 2.13 | % | | 04/25/2018 | | | 1,532,899 | |
| | 1,478,000 | | Noble Energy, Inc. | | 5.88 | % | | 06/01/2022 | | | 1,407,859 | |
| | 1,565,000 | | Providence Health & Services Floating Note# | | 1.28 | % | | 10/01/2017 | | | 1,572,280 | |
| | 1,500,000 | | Regency Energy Partners L.P. | | 4.50 | % | | 11/01/2023 | | | 1,299,776 | |
| | 1,595,000 | | Retail Properties of America, Inc. | | 4.00 | % | | 03/15/2025 | | | 1,506,956 | |
| | 2,275,000 | | Royal Bank of Canada # | | 0.97 | % | | 03/06/2020 | | | 2,248,392 | |
| | 1,330,000 | | Saint Barnabas Health System | | 4.00 | % | | 07/01/2028 | | | 1,313,667 | |
| | 2,250,000 | | Sutter Health | | 1.09 | % | | 08/15/2053 | | | 2,245,430 | |
| | 1,525,000 | | TIAA Asset Management Finance Co., LLC~ | | 4.13 | % | | 11/01/2024 | | | 1,532,990 | |
| | 1,460,000 | | Verizon Communications, Inc. | | 3.65 | % | | 09/14/2018 | | | 1,527,687 | |
| | 1,470,000 | | Zions Bancorporation | | 4.50 | % | | 06/13/2023 | | | 1,512,593 | |
| Total Corporate Bonds & Notes (Cost $39,561,783) | | | | | | | | 39,026,392 | |
| | | | | | | | | | |
| Mortgage Backed Securities — 11.1% | | | | | | | | | |
| | 3,808 | | FHLMC PC, Pool# C00210 | | 8.00 | % | | 01/01/2023 | | | 4,396 | |
| | 375,769 | | FHLMC PC, Pool# 1B0889 # | | 2.27 | % | | 05/01/2033 | | | 396,931 | |
| | 285,101 | | FHLMC PC, Pool# 1J0203 # | | 2.28 | % | | 04/01/2035 | | | 302,819 | |
| | 3,261,211 | | FHLMC PC, Pool# Q25749 | | 4.00 | % | | 04/01/2044 | | | 3,450,850 | |
| | 156,565 | | FHLMC REMIC, Series 2782 | | 4.00 | % | | 11/15/2033 | | | 161,416 | |
| | 10,198 | | FNMA, Pool# 254089 | | 6.00 | % | | 12/01/2016 | | | 10,352 | |
| | 19,383 | | FNMA, Pool# 539082 | | 7.00 | % | | 08/01/2028 | | | 19,615 | |
| | 27,783 | | FNMA, Pool# 625536 | | 6.00 | % | | 01/01/2032 | | | 31,376 | |
| | 41,134 | | FNMA, Pool# 628837 | | 6.50 | % | | 03/01/2032 | | | 47,047 | |
| | 183,486 | | FNMA, Pool# 663238 | | 5.50 | % | | 09/01/2032 | | | 205,304 | |
| | 39,180 | | FNMA, Pool# 744805 # | | 2.02 | % | | 11/01/2033 | | | 39,942 | |
| | 24,011 | | FNMA, Pool# 741373 # | | 2.66 | % | | 12/01/2033 | | | 25,151 | |
| | 70,584 | | FNMA, Pool# 764342 # | | 2.02 | % | | 02/01/2034 | | | 73,064 | |
| | 73,628 | | FNMA, Pool# 848817 | | 5.00 | % | | 01/01/2036 | | | 81,021 | |
| | 1,861,263 | | FNMA, Pool# AS1474 | | 4.50 | % | | 01/01/2044 | | | 2,011,088 | |
| | 954,798 | | FNMA, Pool# AV7911 | | 4.50 | % | | 01/01/2044 | | | 1,035,674 | |
| | 4,884,027 | | FNMA, Pool# AY3879 | | 3.50 | % | | 11/01/2045 | | | 5,046,190 | |
| | 2,807,730 | | FNMA, Pool# AY3880 | | 4.00 | % | | 11/01/2045 | | | 2,987,252 | |
| | 2,316,306 | | FNMA REMIC Trust, Series 2013-115† | | 3.00 | % | | 04/25/2031 | | | 323,866 | |
| | 31,787 | | GNMA, Pool# 781450 | | 5.00 | % | | 06/15/2017 | | | 32,549 | |
| | 22,796 | | GNMA, Pool# 487110 | | 6.50 | % | | 04/15/2029 | | | 26,699 | |
| | 32,483 | | GNMA, Pool# 781186 | | 9.00 | % | | 06/15/2030 | | | 37,452 | |
| | 6,609 | | GNMA, Pool# 571166 | | 7.00 | % | | 08/15/2031 | | | 6,818 | |
| | 2,666,578 | | GNMA REMIC Trust, Series 2013-79† | | 3.00 | % | | 01/20/2042 | | | 362,824 | |
| Total Mortgage Backed Securities (Cost $16,470,617) | | | | | | | | 16,719,696 | |
| | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par | | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Asset Backed Securities — 8.0% | | | | | | | | |
| | 1,140,000 | | AmeriCredit Automobile Receivables Trust, Series 2012-4 C | | 1.93 | % | | 08/08/2018 | | | 1,142,189 | |
| | 700,000 | | AmeriCredit Automobile Receivables Trust, Series 2015-4 | | 1.70 | % | | 07/08/2020 | | | 696,980 | |
| | 875,000 | | AmeriCredit Automobile Receivables Trust, Series 2015-3 B | | 2.08 | % | | 09/08/2020 | | | 864,024 | |
| | 900,000 | | Capital Auto Receivables Asset Trust, Series 2014-1 | | 1.32 | % | | 06/20/2018 | | | 899,790 | |
| | 1,500,000 | | Madison Park Funding XVII, Ltd., Series 2015-17A #~ | | 2.28 | % | | 07/21/2027 | | | 1,478,100 | |
| | 1,500,000 | | Octagon Investment Partners 24, Ltd., Series A-2 #~ | | 2.33 | % | | 05/21/2027 | | | 1,474,050 | |
| | 1,500,000 | | Octagon Investment Partners XXII, Ltd., Series B-2 #~ | | 2.62 | % | | 11/25/2025 | | | 1,493,194 | |
| | 1,500,000 | | OZLM XIII, Ltd. #~ | | 2.38 | % | | 07/30/2027 | | | 1,461,150 | |
| | 1,000,000 | | Santander Drive Auto Receivables Trust, Series 2015-4 | | 1.58 | % | | 09/16/2019 | | | 994,687 | |
| | 1,500,000 | | Stewart Park CLO, Ltd., Series 2015-1 #~ | | 2.32 | % | | 04/15/2026 | | | 1,477,500 | |
| Total Asset Backed Securities (Cost $12,108,272) | | | | | | | | 11,981,664 | |
| | | | | | | | | | |
| Municipal Bonds — 7.2% | | | | | | | | | |
| | 870,000 | | Central Texas Turnpike System | | 5.00 | % | | 08/15/2042 | | | 964,325 | |
| | 670,000 | | District of Columbia Income Tax Secured Revenue Bonds, Series 2010F | | 4.71 | % | | 12/01/2022 | | | 742,494 | |
| | 1,495,000 | | Florida Hurricane Catastrophe Revenue Bonds | | 2.11 | % | | 07/01/2018 | | | 1,504,703 | |
| | 1,000,000 | | Illinois State Sales Tax Revenue | | 2.30 | % | | 06/15/2019 | | | 993,440 | |
| | 1,560,000 | | Indiana State Bond Bank Revenue | | 1.02 | % | | 07/15/2016 | | | 1,561,794 | |
| | 745,000 | | Lakeland Florida Hospital System | | 5.00 | % | | 11/15/2034 | | | 835,301 | |
| | 1,000,000 | | North Texas Tollway Authority | | 5.00 | % | | 01/01/2031 | | | 1,155,150 | |
| | 2,750,000 | | Port Authority New York & New Jersey | | 5.31 | % | | 12/01/2019 | | | 3,083,328 | |
| Total Municipal Bonds (Cost $10,545,336) | | | | | | | | 10,840,535 | |
| | | | | | | | | | |
| U.S. Treasury Notes — 19.8% | | | | | | | | | |
| | 2,000,000 | | United States Treasury Note | | 0.38 | % | | 02/15/2016 | | | 2,000,234 | |
| | 4,665,000 | | United States Treasury Note | | 0.63 | % | | 10/15/2016 | | | 4,661,263 | |
| | 6,525,000 | | United States Treasury Note | | 1.38 | % | | 02/29/2020 | | | 6,450,830 | |
| | 7,635,000 | | United States Treasury Note | | 1.88 | % | | 08/31/2022 | | | 7,548,060 | |
| | 3,145,000 | | United States Treasury Note | | 2.00 | % | | 02/15/2025 | | | 3,074,851 | |
| | 6,090,000 | | United States Treasury Note | | 2.25 | % | | 11/15/2025 | | | 6,077,035 | |
| Total U.S. Treasury Notes (Cost $29,972,144) | | | | | | | | 29,812,273 | |
| | | | | | | | | | |
| Affiliated Mutual Funds (Note 3) — 24.4% | | | | | | | | | |
| | 3,682,966 | | Brown Advisory Mortgage Securities Fund — Institutional Shares | | | | | | | | 36,829,660 | |
| Total Affiliated Mutual Funds (Cost $37,384,761) | | | | | | | | 36,829,660 | |
| | | | | | | | | | |
| Short-Term Investments — 2.8% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Funds — 2.8% | | | | | | | | | |
| | 4,194,598 | | DWS Cash Account Trust — Government & Agency Securities Portfolio — Institutional Shares, 0.04%* | | | | | | | | 4,194,598 | |
| Total Short-Term Investments (Cost $4,194,598) | | | | | | | | 4,194,598 | |
| Total Investments — 99.2% (Cost $150,237,511) | | | | | | | | 149,404,818 | |
| Other Assets in Excess of Liabilities — 0.8% | | | | | | | | 1,266,239 | |
| NET ASSETS — 100.0% | | | | | | | $ | 150,671,057 | |
| | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2015 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
| Corporate Bonds & Notes | 25.9% |
| Affiliated Mutual Funds | 24.4% |
| U.S. Treasury Notes | 19.8% |
| Mortgage Backed Securities | 11.1% |
| Asset Backed Securities | 8.0% |
| Municipal Bonds | 7.2% |
| Money Market Funds | 2.8% |
| Other Assets and Liabilities | 0.8% |
| | 100.0% |
| # | Variable rate security. Rate disclosed is as of December 31, 2015. |
| † | 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, 2015, the value of these securities amounted to $8,916,984 or 5.9% of net assets. |
| * | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Total Return Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ending December 31, 2015, the Brown Advisory Total Return Fund Institutional Shares (the “Fund”) rose 0.84%, slightly outperforming the 0.65% gain for the benchmark, the Barclays US Aggregate Bond Index.
The Fund aims to generate returns primarily through bottom-up analysis, supported by a detailed and disciplined credit process. Sector selection and other portfolio-level positioning is based more on the balance of risk and reward than on benchmark weightings or any sort of macro forecasting.
Credit selection was the biggest positive contributor to performance during this period. Credit spreads widened considerably, causing corporate bonds to underperform Treasuries by 117 basis points in the last half of 2015. The Fund was overweight credit generally and high-yield bonds specifically. Despite the overweight into a poor market, the Fund’s individual bond selections were strong enough to make up for the overweight.
Among our stronger performing individual selections were Carrols Restaurants, Janus Capital, E-Trade Financial, Synovus and Interface Security.
Mortgage-bond selection was another positive, with our selections prepaying slower than a coupon-matched set of generic mortgages every month in 2015. This meaningful income generation helped to drive outperformance in this sector.
Our careful analysis of cash flows and balance sheets led us to remain cautious with energy and other cyclical credits. These were some of the worst-performing parts of the bond market during the second half of 2015. While we are monitoring these spaces for opportunities, we will remain true to our process and let our relative weighting in various sectors flow from that process.
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.
Brown Advisory Total Return FundSchedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Mortgage Backed Securities — 38.0% | | | | | | | | |
| | 736,166 | | FHLMC PC, Pool# J3-2596 | | 3.50 | % | | 08/01/2030 | | | 771,749 | |
| | 1,144,568 | | FHLMC PC, Pool# C9-1818 | | 4.00 | % | | 02/01/2035 | | | 1,223,737 | |
| | 4,612,744 | | FHLMC REMIC, Series 4094† | | 2.50 | % | | 03/15/2027 | | | 371,653 | |
| | 804,124 | | FHLMC REMIC, Series 4107† | | 3.00 | % | | 08/15/2027 | | | 205,348 | |
| | 1,410,472 | | FHLMC REMIC, Series 4203† | | 3.00 | % | | 04/15/2033 | | | 161,868 | |
| | 2,637,636 | | FHLMC REMIC, Series 4143† | | 3.50 | % | | 09/15/2042 | | | 343,317 | |
| | 3,000,000 | | FHLMC REMIC, Series 4495 | | 2.50 | % | | 07/15/2045 | | | 2,896,412 | |
| | 1,122,717 | | FHLMC REMIC, Series 4495† | | 3.50 | % | | 07/15/2045 | | | 219,407 | |
| | 743,698 | | FNMA, Pool# BA2725 | | 3.50 | % | | 10/01/2030 | | | 781,060 | |
| | 2,426,952 | | FNMA, Pool# AS2249 | | 4.00 | % | | 04/01/2039 | | | 2,576,004 | |
| | 846,636 | | FNMA, Pool# AL6768 | | 6.00 | % | | 05/01/2041 | | | 959,223 | |
| | 845,042 | | FNMA, Pool# AU6230 | | 5.00 | % | | 09/01/2043 | | | 932,035 | |
| | 591,947 | | FNMA, Pool# AY0674 | | 3.50 | % | | 02/01/2045 | | | 612,104 | |
| | 984,992 | | FNMA, Pool# AY0677 | | 3.50 | % | | 03/01/2045 | | | 1,020,062 | |
| | 791,904 | | FNMA, Pool# AZ2001 | | 3.50 | % | | 05/01/2045 | | | 818,870 | |
| | 248,666 | | FNMA, Pool# AY3869 | | 4.00 | % | | 07/01/2045 | | | 264,565 | |
| | 497,206 | | FNMA, Pool# AY3870 | | 4.00 | % | | 07/01/2045 | | | 528,993 | |
| | 731,988 | | FNMA, Pool# AY3871 | | 4.50 | % | | 07/01/2045 | | | 793,237 | |
| | 1,494,517 | | FNMA, Pool# AY3873 | | 4.00 | % | | 08/01/2045 | | | 1,590,074 | |
| | 596,915 | | FNMA, Pool# AZ7182 | | 4.50 | % | | 08/01/2045 | | | 647,778 | |
| | 997,136 | | FNMA, Pool# AY3876 | | 4.00 | % | | 09/01/2045 | | | 1,060,892 | |
| | 1,493,935 | | FNMA, Pool# AY3875 | | 4.50 | % | | 09/01/2045 | | | 1,618,941 | |
| | 996,919 | | FNMA, Pool# AY3878 | | 4.50 | % | | 09/01/2045 | | | 1,080,337 | |
| | 998,621 | | FNMA, Pool# AY3882 | | 4.50 | % | | 11/01/2045 | | | 1,082,181 | |
| | 1,687,494 | | FNMA REMIC Trust, Series 2013-24† | | 3.00 | % | | 11/25/2040 | | | 236,984 | |
| | 6,500,000 | | FNMA, 4.0%, Due TBA January | | 4.00 | % | | 01/15/2046 | | | 6,878,625 | |
| Total Mortgage Backed Securities (Cost $29,786,786) | | | | | | | | 29,675,456 | |
| | | | | | | | | | |
| Asset Backed Securities — 34.6% | | | | | | | | | |
| | 800,000 | | AmeriCredit Automobile Receivables, Series 2015-3 | | 2.73 | % | | 03/08/2021 | | | 795,081 | |
| | 500,000 | | AmeriCredit Automobile Receivables, Series 2015-4 | | 2.11 | % | | 01/08/2021 | | | 497,370 | |
| | 500,000 | | Exeter Automobiles Receivables Trust, Series 2014-1^ | | 2.42 | % | | 01/15/2019 | | | 500,036 | |
| | 750,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN1# | | 2.39 | % | | 02/26/2024 | | | 748,044 | |
| | 770,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN2# | | 1.87 | % | | 04/25/2024 | | | 757,273 | |
| | 700,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA1# | | 2.27 | % | | 10/25/2027 | | | 690,967 | |
| | 2,000,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA2# | | 2.82 | % | | 12/27/2027 | | | 1,990,624 | |
| | 750,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA3# | | 3.27 | % | | 04/25/2028 | | | 749,171 | |
| | 1,500,000 | | Highbridge Loan Management, Series 4a-2014 A2a#^ | | 2.37 | % | | 07/28/2025 | | | 1,470,128 | |
| | 800,000 | | Highbridge Loan Management, Series 7a-2015 C#^ | | 3.70 | % | | 11/15/2026 | | | 791,120 | |
| | 1,000,000 | | Highbridge Loan Management, Series 6a-2015 C#^ | | 3.40 | % | | 05/05/2027 | | | 971,800 | |
| | 750,000 | | Jamestown CLO III, Ltd. 2013-3A A2A, Series FLT#^ | | 2.24 | % | | 01/15/2026 | | | 736,798 | |
| | 810,000 | | Madison Park Funding XVII, Ltd., Series 2015-17A#^ | | 2.28 | % | | 07/21/2027 | | | 798,174 | |
| | 500,000 | | Madison Park Funding XVII, Ltd., Series 2015-17A#^ | | 3.18 | % | | 07/21/2027 | | | 489,500 | |
| | 1,300,000 | | Magnetite XII, Series 2015-12#^ | | 2.52 | % | | 04/15/2027 | | | 1,296,360 | |
| | 750,000 | | Magnetite XII, Series 2015-12#^ | | 3.42 | % | | 04/15/2027 | | | 741,225 | |
| | 1,750,000 | | Marathon CLO VI Ltd 2014-6A A2, Series 2014-6#^ | | 2.41 | % | | 05/13/2025 | | | 1,705,550 | |
| | 750,000 | | Octagon Investment Partners 24, Ltd., Series A-2#^ | | 2.33 | % | | 05/21/2027 | | | 737,025 | |
| | 1,000,000 | | Octagon Investment Partners XXII, Ltd., Series B-2#^ | | 2.62 | % | | 11/25/2025 | | | 995,463 | |
| | 2,000,000 | | Octagon Investment Partners XXII, Ltd., Series C-1#^ | | 3.57 | % | | 11/25/2025 | | | 1,973,253 | |
| | 1,000,000 | | OZLM Funding, Ltd., Series 2013-4#^ | | 2.07 | % | | 07/22/2025 | | | 971,100 | |
| | 750,000 | | OZLM IX, Ltd. 2014-9A B#^ | | 3.59 | % | | 01/20/2027 | | | 745,725 | |
| | 1,000,000 | | OZLM XIII, Ltd.#^ | | 2.38 | % | | 07/30/2027 | | | 974,100 | |
| | 458,852 | | Santander Drive Automobile Receivables Trust, Series 2013-4 | | 2.16 | % | | 01/15/2020 | | | 459,749 | |
| | 800,000 | | Santander Drive Automobile Receivables Trust, Series 2015-4 | | 2.26 | % | | 06/15/2020 | | | 800,178 | |
| | 1,000,000 | | Stewart Park CLO, Ltd., Series 2015-1#^ | | 2.32 | % | | 04/15/2026 | | | 985,000 | |
| | 1,000,000 | | Stewart Park CLO, Ltd., Series 2015-1#^ | | 3.22 | % | | 04/15/2026 | | | 978,000 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Asset Backed Securities — (Continued) | | | | | | | | |
| | 750,000 | | Sudbury Mill CLO, Ltd., Series 2013#^ | | 3.32 | % | | 01/20/2026 | | | 730,500 | |
| | 1,000,000 | | Symphony CLO XIV, Ltd.#^ | | 2.37 | % | | 07/14/2026 | | | 988,500 | |
| Total Asset Backed Securities (Cost $27,286,287) | | | | | | | | 27,067,814 | |
| | | | | | | | | | |
| Corporate Bonds & Notes — 29.0% | | | | | | | | | |
| | 800,000 | | Ally Financial, Inc. | | 3.60 | % | | 05/21/2018 | | | 802,000 | |
| | 810,000 | | Bed Bath & Beyond, Inc. | | 3.75 | % | | 08/01/2024 | | | 791,501 | |
| | 380,000 | | Boyd Gaming Corp. | | 9.00 | % | | 07/01/2020 | | | 404,700 | |
| | 740,000 | | Canadian National Resources Ltd. | | 5.70 | % | | 05/15/2017 | | | 756,052 | |
| | 840,000 | | Capital One Financial Co.# | | 5.55 | % | | 12/29/2049 | | | 837,900 | |
| | 750,000 | | Carrols Restaurant Group, Inc. | | 8.00 | % | | 05/01/2022 | | | 795,000 | |
| | 800,000 | | CC Holdings GS V LLC/Crown Castle GS III Corp. | | 3.85 | % | | 04/15/2023 | | | 786,365 | |
| | 785,000 | | CIT Group, Inc.^ | | 5.50 | % | | 02/15/2019 | | | 822,288 | |
| | 795,000 | | Columbia Property Trust Operating Partnership L.P. | | 4.15 | % | | 04/01/2025 | | | 787,595 | |
| | 500,000 | | Cornerstone Chemical Co.^ | | 9.38 | % | | 03/15/2018 | | | 455,000 | |
| | 600,000 | | Dollar Tree, Inc. ^ | | 5.25 | % | | 03/01/2020 | | | 622,500 | |
| | 720,000 | | E*TRADE Financial Corp. | | 5.38 | % | | 11/15/2022 | | | 756,000 | |
| | 770,000 | | Education Realty Operating Partnership L.P. | | 4.60 | % | | 12/01/2024 | | | 761,079 | |
| | 478,000 | | Enterprise Products Operating, LLC | | 3.70 | % | | 02/15/2026 | | | 429,648 | |
| | 655,000 | | Exelis, Inc. | | 5.55 | % | | 10/01/2021 | | | 719,161 | |
| | 720,000 | | First American Financial Corp. | | 4.60 | % | | 11/15/2024 | | | 730,231 | |
| | 795,000 | | Healthcare Trust of America, Inc. | | 3.38 | % | | 07/15/2021 | | | 784,620 | |
| | 750,000 | | INEOS Group Holdings S.A.^ | | 5.88 | % | | 02/15/2019 | | | 730,313 | |
| | 250,000 | | Interface Security Systems Holdings, Inc. | | 9.25 | % | | 01/15/2018 | | | 245,938 | |
| | 780,000 | | Isle of Capri Casinos, Inc. | | 5.88 | % | | 03/15/2021 | | | 799,500 | |
| | 890,000 | | Janus Capital Group, Inc. | | 4.88 | % | | 08/01/2025 | | | 915,027 | |
| | 790,000 | | JB Hunt Transport Services, Inc. | | 2.40 | % | | 03/15/2019 | | | 795,554 | |
| | 730,000 | | Legg Mason, Inc. | | 5.63 | % | | 01/15/2044 | | | 727,654 | |
| | 400,000 | | Monitronics International, Inc. | | 9.13 | % | | 04/01/2020 | | | 319,000 | |
| | 825,000 | | Noble Energy, Inc. | | 5.88 | % | | 06/01/2022 | | | 785,848 | |
| | 850,000 | | Regency Energy Partners L.P. | | 4.50 | % | | 11/01/2023 | | | 736,539 | |
| | 810,000 | | Retail Properties of America, Inc. | | 4.00 | % | | 03/15/2025 | | | 765,288 | |
| | 715,000 | | Royal Caribbean Cruises, Ltd. | | 5.25 | % | | 11/15/2022 | | | 736,450 | |
| | 600,000 | | Swedbank AB#~ | | 5.50 | % | | 12/29/2049 | | | 599,491 | |
| | 745,000 | | Synovus Financial Corp.# | | 5.75 | % | | 12/15/2025 | | | 763,625 | |
| | 850,000 | | TIAA Asset Management Finance Co., LLC^ | | 4.13 | % | | 11/01/2024 | | | 854,453 | |
| | 780,000 | | Zions Bancorporation | | 4.50 | % | | 06/13/2023 | | | 802,601 | |
| Total Corporate Bonds & Notes (Cost $23,101,902) | | | | | | | | 22,618,921 | |
| | | | | | | | | | |
| Municipal Bonds — 1.5% | | | | | | | | | |
| | 1,200,000 | | Health Care Authority for Baptist Health | | 5.50 | % | | 11/15/2043 | | | 1,202,628 | |
| Total Municipal Bonds (Cost $1,256,651) | | | | | | | | 1,202,628 | |
| | | | | | | | | | |
| U.S. Treasury Notes — 1.0% | | | | | | | | | |
| | 750,000 | | United States Treasury Note | | 0.88 | % | | 01/31/2017 | | | 750,220 | |
| Total U.S. Treasury Notes (Cost $753,376) | | | | | | | | 750,220 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Short-Term Investments — 3.7% | | | |
| | | | |
| Money Market Funds — 3.7% | | | |
| | 2,867,377 | | DWS Cash Account Trust — Government & Agency Securities Portfolio — Institutional Shares, 0.04%* | | | 2,867,377 | |
| Total Short-Term Investments (Cost $2,867,377) | | | 2,867,377 | |
| Total Investments — 107.8% (Cost $85,052,379) | | | 84,182,416 | |
| Liabilities in Excess of Other Assets — (7.8)% | | | (6,076,061 | ) |
| NET ASSETS — 100.0% | | $ | 78,106,355 | |
| ^ | 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, 2015, the value of these securities amounted to $23,063,911 or 29.5% of net assets. |
| † | Interest Only Security |
| # | Variable rate security. Rate disclosed is as of December 31, 2015. |
| * | Annualized seven-day yield as of December 31, 2015. |
Futures Contracts — Long (Note 7)
| | | | | | | | | | | | Unrealized Appreciation |
Issue | | Contracts | | Expriation Date | | Notional Amount | | (Depreciation) |
| U.S. Treasury Long Bond Futures March 2016 | | 10 | | 03/21/2016 | | | $ | 1,524,710 | | | | $ | 12,790 | |
| U.S. Treasury Ultra Bond Futures March 2016 | | 50 | | 03/21/2016 | | | | 7,849,835 | | | | | 84,540 | |
| | | | | | | | $ | 9,374,545 | | | | $ | 97,330 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Mortgage Backed Securities | 38.0% |
| Asset Backed Securities | 34.6% |
| Corporate Bonds & Notes | 29.0% |
| Money Market Funds | 3.7% |
| Municipal Bonds | 1.5% |
| U.S. Treasury Notes | 1.0% |
| Other Assets and Liabilities | (7.8)% |
| | 100.0% |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Strategic Bond FundA Message to Our Shareholders
December 31, 2015
Dear Shareholder:
The Brown Advisory Strategic Bond Fund Investor Shares (the “Fund”) fell 1.22% during the six months ended December 31, 2015, trailing the 0.57% gain in the Barclays Intermediate US Aggregate Bond Index, the Fund’s benchmark.
The Fund’s strategy combines bottom-up credit selection with opportunistic sector allocation, both concentrated in our highest conviction ideas. We analyze investment ideas using rigorous underwriting standards and deep fundamental analysis to determine a bond’s appropriate risk-adjusted return. This process primarily guides our capital allocation decisions across sectors.
The Fund attempts to mitigate duration risk and has been operating with a duration roughly half that of the benchmark. As such, the Fund has been managed with a duration of between one and two years. This has been relatively consistent as we have not been attempting to generate meaningful alpha by taking a position on duration. During the period, we increased our net exposure from 76% to 108%, while lowering duration by using a combination of floating rate debt and hedged To Be Announced securities (“TBA”). Our gross exposure was 156%, an increase from 124%.
During the period, we increased our exposure to structured products from just under 50% to roughly 97% as of December 31 (78% on a hedged basis). Our allocation to this sector has consisted of Collateralized Loan Obligations (“CLOs”) (primarily double and single A-rated tranches), Government Sponsored Entity (“GSE”) risk-sharing instruments and interest-only Mortgage-Backed Securities (“MBS”). In the second half of 2015, however, we have also added exposure to agency-backed specified mortgage pools, hedged-TBA, and A-rated auto asset-backed securities (“ABS”). These sectors have been instrumental in helping us improve the overall rating of the portfolio, enhance yield, reduce duration and allocate capital away from idiosyncratic high yield corporate exposure, where risk-adjusted returns have been lacking. The portfolio at calendar year-end was approximately 60% floating rate.
Our best performing sectors were municipal bonds, which contributed 36 basis points to performance, and investment grade corporate bonds, which contributed 16 basis points. These were offset by high yield, which detracted 98 basis points and CLOs, which detracted 39 basis points. We made a strategic decision to begin selling cyclical high yield corporate bonds beginning in the second quarter, which brought our high yield exposure from roughly 50% at the beginning of March to 13% by December 31, 2015. Therefore, while high yield bonds did hurt absolute performance over the past six months, the allocation of capital away from the sector and toward higher-rated MBS and ABS helped to buoy the portfolio during the recent market volatility. ABS added 2 basis points to performance, while our combined MBS exposure, including hedged TBA, was neutral.
Among corporate bonds, our best performance again came from our high yield credit selection. The Fund’s high yield bond selection outperformed the Barclays US Corporate High Yield Index during the period by 228 basis points. Winners included Interface Security, Carrols Restaurants, Synovous Financial and CIT. The contribution from these performers was more than offset by an investment in the coal sector, particularly Peabody Energy, which we eliminated from the portfolio by the end of October.
Looking forward, we have been earning solid risk-adjusted return in structured products while we watch and wait for opportunities in corporate bonds that present good relative value. While we do not know where the economy is on a cyclical basis, we are operating on the assumption that a recession could come in the next couple of years. Hence, we are focused on credits that we believe are capable of generating free cash flow through the cycle, offer good structures that have the potential to protect recoveries in a downside scenario and have strong enterprise value coverage. By default, these criteria tend to cull our investment universe, guiding us toward what we believe are solid, defensible business models with good industry fundamentals and strong management teams. We believe our disciplined credit process has the potential to add value whether credit is widening or tightening, and that this should be a key driver of performance going forward.
Sincerely,
Robert H. Snyder
Portfolio Manager
Thomas D.D. Graff, CFA
Portfolio Manager
Brown Advisory Strategic Bond FundA Message to Our Shareholders
December 31, 2015
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. Bond ratings are grades given to bonds that indicate their credit quality as determined by a private independent rating service such as Standard & Poor’s. The firm evaluates a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion. Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade. In limited situations when the rating agency has not issued a formal rating, the Advisor will classify the security as non-rated.
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.
Brown Advisory Strategic Bond FundSchedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Asset Backed Securities — 66.0% | | | | | | | | |
| | 600,000 | | AmeriCredit Automobile Receivables, Series 2015-3 | | 2.73 | % | | 03/08/2021 | | | 596,311 | |
| | 250,000 | | Americredit Automobile Receivables, Series 2015-4 | | 2.11 | % | | 01/08/2021 | | | 248,685 | |
| | 370,000 | | Exeter Automobiles Receivables Trust, Series 2014-1^ | | 2.42 | % | | 01/15/2019 | | | 370,027 | |
| | 750,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN1 # | | 2.42 | % | | 02/26/2024 | | | 748,044 | |
| | 700,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA1 # | | 2.27 | % | | 10/25/2027 | | | 690,967 | |
| | 1,200,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA2 # | | 2.82 | % | | 12/27/2027 | | | 1,194,375 | |
| | 1,000,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA3 # | | 3.27 | % | | 04/25/2028 | | | 998,894 | |
| | 1,500,000 | | Highbridge Loan Management, Series 4a-2014 A2a #^ | | 2.37 | % | | 07/28/2025 | | | 1,470,128 | |
| | 1,000,000 | | Highbridge Loan Management, Series 7-2015 #^ | | 4.07 | % | | 11/15/2026 | | | 912,800 | |
| | 2,000,000 | | Highbridge Loan Management, Series 6a-2015 C #^ | | 3.40 | % | | 05/05/2027 | | | 1,943,600 | |
| | 750,000 | | Jamestown CLO III, Ltd. 2013-3A A2A, Series FLT #^ | | 2.24 | % | | 01/15/2026 | | | 736,798 | |
| | 825,000 | | Madison Park Funding XVII, Ltd., Series 2015-17A #^ | | 2.28 | % | | 07/21/2027 | | | 812,955 | |
| | 500,000 | | Madison Park Funding XVII, Ltd., Series 2015-17A #^ | | 3.18 | % | | 07/21/2027 | | | 489,500 | |
| | 1,300,000 | | Magnetite XII, Series 2015-12 #^ | | 2.52 | % | | 04/15/2027 | | | 1,296,360 | |
| | 750,000 | | Magnetite XII, Series 2015-12 #^ | | 3.42 | % | | 04/15/2027 | | | 741,225 | |
| | 1,250,000 | | Marathon CLO VI Ltd 2014-6A A2, Series 2014-6 #^ | | 2.41 | % | | 05/13/2025 | | | 1,218,250 | |
| | 1,030,000 | | Marathon CLO VI Ltd 2014-6A B, Series 2014-6 #^ | | 3.21 | % | | 05/13/2025 | | | 943,995 | |
| | 750,000 | | Octagon Investment Partners 24, Ltd., Series A-2 #^ | | 2.33 | % | | 05/21/2027 | | | 737,025 | |
| | 1,000,000 | | Octagon Investment Partners XXII, Ltd., Series B-2 #^ | | 2.62 | % | | 11/25/2025 | | | 995,463 | |
| | 2,000,000 | | Octagon Investment Partners XXII, Ltd., Series C-1 #^ | | 3.57 | % | | 11/25/2025 | | | 1,973,253 | |
| | 1,000,000 | | OZLM Funding, Ltd., Series 2013-4 #^ | | 2.07 | % | | 07/22/2025 | | | 971,100 | |
| | 750,000 | | OZLM IX, Ltd. 2014-9A B #^ | | 3.59 | % | | 01/20/2027 | | | 745,725 | |
| | 1,000,000 | | OZLM XIII, Ltd. #^ | | 2.38 | % | | 07/30/2027 | | | 974,100 | |
| | 747,604 | | Santander Drive Automobile Receivables Trust, Series 2013-A^ | | 1.89 | % | | 10/15/2019 | | | 748,490 | |
| | 420,965 | | Santander Drive Automobile Receivables Trust, Series 2013-4 | | 2.16 | % | | 01/15/2020 | | | 421,788 | |
| | 1,000,000 | | Stewart Park CLO, Ltd., Series 2015-1 #^ | | 2.32 | % | | 04/15/2026 | | | 985,000 | |
| | 1,000,000 | | Stewart Park CLO, Ltd., Series 2015-1 #^ | | 3.22 | % | | 04/15/2026 | | | 978,000 | |
| | 750,000 | | Sudbury Mill CLO, Ltd., Series 2013 #^ | | 3.32 | % | | 01/20/2026 | | | 730,500 | |
| | 1,500,000 | | Symphony CLO XIV, Ltd. #^ | | 2.37 | % | | 07/14/2026 | | | 1,482,750 | |
| | 1,000,000 | | Voya CLO 2015-1, Ltd., Series 2015-1 #^ | | 2.42 | % | | 04/18/2027 | | | 991,400 | |
| | 1,000,000 | | Voya CLO 2015-1, Ltd., Series 2015-1 #^ | | 3.32 | % | | 04/18/2027 | | | 985,400 | |
| | 360,000 | | Westlake Automobile Receivables Trust, Series B^ | | 1.24 | % | | 11/15/2019 | | | 359,757 | |
| Total Asset Backed Securities (Cost $29,831,861) | | | | | | | | 29,492,665 | |
| | | | | | | | | | |
| Mortgage Backed Securities — 40.0% | | | | | | | | | |
| | 804,123 | | FHLMC REMIC, Series 4107† | | 3.00 | % | | 08/15/2027 | | | 205,348 | |
| | 2,637,635 | | FHLMC REMIC, Series 4143† | | 3.50 | % | | 09/15/2042 | | | 343,317 | |
| | 1,280,291 | | FHLMC REMIC, Series 4495† | | 3.50 | % | | 07/15/2045 | | | 250,201 | |
| | 845,042 | | FNMA, Pool# AU6230 | | 5.00 | % | | 09/01/2043 | | | 932,035 | |
| | 998,621 | | FNMA, Pool# AY3882 | | 4.50 | % | | 11/01/2045 | | | 1,082,181 | |
| | 1,687,494 | | FNMA REMIC Trust, Series 2013-24† | | 3.00 | % | | 11/25/2040 | | | 236,984 | |
| | 1,400,000 | | FNMA, 3.5%, Due TBA January | | 3.50 | % | | 01/15/2031 | | | 1,466,227 | |
| | 5,800,000 | | FNMA, 3.5%, Due TBA January | | 3.50 | % | | 01/15/2046 | | | 5,984,448 | |
| | 7,000,000 | | FNMA, 4.0%, Due TBA January | | 4.00 | % | | 01/15/2046 | | | 7,407,750 | |
| Total Mortgage Backed Securities (Cost $18,068,966) | | | | | | | | 17,908,491 | |
| | | | | | | | | | |
| Corporate Bonds & Notes — 19.2% | | | | | | | | | |
| | 300,000 | | Boyd Gaming Corp. | | 9.00 | % | | 07/01/2020 | | | 319,500 | |
| | 300,000 | | Capital One Financial Co.# | | 5.55 | % | | 12/29/2049 | | | 299,250 | |
| | 300,000 | | Carrols Restaurant Group, Inc. | | 8.00 | % | | 05/01/2022 | | | 318,000 | |
| | 300,000 | | CIT Group, Inc.^ | | 5.50 | % | | 02/15/2019 | | | 314,250 | |
| | 300,000 | | Columbia Property Trust Operating Partnership L.P. | | 4.15 | % | | 04/01/2025 | | | 297,206 | |
| | 250,000 | | Community Health Systems, Inc. | | 5.13 | % | | 08/01/2021 | | | 250,000 | |
| | 500,000 | | Cornerstone Chemical Co.^ | | 9.38 | % | | 03/15/2018 | | | 455,000 | |
| | 250,000 | | Crown Americas, LLC | | 6.25 | % | | 02/01/2021 | | | 258,437 | |
| | 250,000 | | E*TRADE Financial Corp. | | 5.38 | % | | 11/15/2022 | | | 262,500 | |
| | 300,000 | | Education Realty Operating Partnership L.P. | | 4.60 | % | | 12/01/2024 | | | 296,524 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Strategic Bond FundSchedule of Investments
December 31, 2015 (Unaudited)
| Par | | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Corporate Bonds & Notes — (Continued) | | | | | | | | |
| | 170,000 | | Enterprise Products Operating, LLC | | 3.70 | % | | 02/15/2026 | | | 152,804 | |
| | 300,000 | | Exelis, Inc. | | 5.55 | % | | 10/01/2021 | | | 329,387 | |
| | 300,000 | | First American Financial Corp. | | 4.60 | % | | 11/15/2024 | | | 304,263 | |
| | 300,000 | | Health Care REIT, Inc. | | 5.25 | % | | 01/15/2022 | | | 324,904 | |
| | 500,000 | | INEOS Group Holdings S.A.^ | | 5.88 | % | | 02/15/2019 | | | 486,875 | |
| | 750,000 | | Interface Master Holdings, Inc.^ | | 12.50 | % | | 08/01/2018 | | | 731,250 | |
| | 750,000 | | Interface Security Systems Holdings, Inc. | | 9.25 | % | | 01/15/2018 | | | 737,813 | |
| | 1,000,000 | | Monitronics International, Inc. | | 9.13 | % | | 04/01/2020 | | | 797,500 | |
| | 300,000 | | Noble Energy, Inc. | | 5.88 | % | | 06/01/2022 | | | 285,763 | |
| | 300,000 | | Regency Energy Partners L.P. | | 4.50 | % | | 11/01/2023 | | | 259,955 | |
| | 300,000 | | Royal Caribbean Cruises, Ltd. | | 5.25 | % | | 11/15/2022 | | | 309,000 | |
| | 200,000 | | Swedbank AB # | | 5.50 | % | | 12/29/2049 | | | 199,830 | |
| | 300,000 | | Synovus Financial Corp.# | | 5.75 | % | | 12/15/2025 | | | 307,500 | |
| | 300,000 | | Zions Bancorporation | | 4.50 | % | | 06/13/2023 | | | 308,693 | |
| Total Corporate Bonds & Notes (Cost $8,891,350) | | | | | | | | 8,606,204 | |
| | | | | | | | | | |
| Municipal Bonds — 3.9% | | | | | | | | | |
| | 250,000 | | Franklin County Health Care Facilities Friendship Village | | 5.00 | % | | 11/15/2034 | | | 275,472 | |
| | 335,000 | | Houston Texas Airport System | | 5.00 | % | | 07/15/2020 | | | 356,219 | |
| | 200,000 | | Houston Texas Airport System | | 5.00 | % | | 07/15/2020 | | | 215,182 | |
| | 600,000 | | New York City Industrial Development Agency # | | 2.00 | % | | 08/01/2028 | | | 601,296 | |
| | 250,000 | | Wisconsin Health & Educational Facilities Authority | | 5.00 | % | | 05/01/2027 | | | 277,755 | |
| Total Municipal Bonds (Cost $1,707,384) | | | | | | | | 1,725,924 | |
| | | | | | | | | | |
| Mutual Funds — 2.1% | | | | | | | | | |
| | 17,204 | | Blackrock MuniYield Michigan Quality Fund | | | | | | | | 240,168 | |
| | 5,000 | | Blackrock MuniHoldings New Jersey Quality Fund | | | | | | | | 72,150 | |
| | 4,861 | | Eaton Vance Massachusetts Municipal Bond Fund | | | | | | | | 71,943 | |
| | 14,476 | | PIMCO California Municipal Income Fund II | | | | | | | | 143,891 | |
| | 8,341 | | PIMCO California Municipal Income Fund III | | | | | | | | 99,425 | |
| | 11,168 | | PIMCO New York Municipal Income Fund II | | | | | | | | 137,925 | |
| | 1,030 | | PIMCO New York Municipal Income Fund III | | | | | | | | 10,578 | |
| | 13,000 | | Pioneer Municipal High Income Advantage Trust | | | | | | | | 173,550 | |
| Total Mutual Funds (Cost $919,109) | | | | | | | | 949,630 | |
| | | | | | | | | | |
| Short-Term Investments — 0.9% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Funds — 0.7% | | | | | | | | | |
| | 298,747 | | DWS Cash Account Trust — Government & Agency Securities Portfolio — Institutional Shares, 0.04%* | | | | | | | | 298,747 | |
| | | | | | | | | | |
| U.S. Treasury Bills — 0.2% | | | | | | | | | |
| | 100,000 | | United States Treasury Bill | | | | | | | | 99,968 | |
| Total Short-Term Investments (Cost $398,715) | | | | | | | | 398,715 | |
| Total Investments — 132.1% (Cost $59,817,385) | | | | | | | | 59,081,629 | |
| Liabilities in Excess of Other Assets — (32.1)% | | | | | | | | (14,360,754 | ) |
| NET ASSETS — 100.0% | | | | | | | $ | 44,720,875 | |
| ^ | 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, 2015, the value of these securities amounted to $26,580,976, or 59.4% of net assets. |
| † | Interest Only Security |
| # | Variable rate security. Rate disclosed is as of December 31, 2015. |
| * | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2015 (Unaudited)
Futures Contracts — Short (Note 7)
| | | | | | | | | | Unrealized Appreciation | |
Issue | Contracts | | Expriation Date | | Notional Amount | | (Depreciation) | |
| U.S. Treasury 5-Year Note Futures March 2016 | (90) | | 03/31/16 | | | $ | (10,665,534 | ) | | | $ | 16,706 | | |
| | | | | | | $ | (10,665,534 | ) | | | $ | 16,706 | | |
PORTFOLIO HOLDINGS
% of Net Assets
| Asset Backed Securities | 66.0% |
| Mortgage Backed Securities | 40.0% |
| Corporate Bonds & Notes | 19.2% |
| Municipal Bonds | 3.9% |
| Mutual Funds | 2.1% |
| Money Market Funds | 0.7% |
| U.S. Treasury Bills | 0.2% |
| Other Assets and Liabilities | (32.1)% |
| | 100.0% |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Maryland Bond Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Maryland Bond Fund (the “Fund”) rose 2.07% in value. During the same period, the Barclays 1-10 Year Blended Municipal Bond Index (the “Index”), the Fund’s benchmark, increased 2.12%.
The fourth quarter of 2015 was marked by meaningful volatility in fixed income markets, capping off a full year of high uncertainty. The Federal Reserve raised its benchmark interest rate target on December 16, ending months of speculation about exactly when the central bank would begin the process of rate normalization. After all the consternation on the issue during the summer and fall, the increase in the main interest rate did not trigger much impact in the market. Looking forward to 2016, we are agnostic on how Fed policy will evolve. Policymakers’ vacillation on the timing of liftoff damaged their credibility, and the continued uncertainty about the outlook for the economy makes projecting interest rates extremely challenging. To achieve our investment objectives, we prefer to focus our efforts on fundamental analysis and credit selection.
Sector and individual credit selection has been the largest positive contributor to the Fund’s performance. The Fund increased its 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 were the largest contributor. On a combined basis, these holdings returned 4.07% for the 6-month period versus the Index’s health care return of 2.2%. This relative performance combined with a 15% sector overweight, contributed 72 basis points of relative contribution for the portfolio. Other notable positive contributions were gained from Single Family Housing (+3.55%), Tax Revenue (+2.86%), Corporate-backed (+2.32%).
Looking forward into 2016, we are becoming increasingly selective in the tax-exempt health care space. We still see good value in select credits, mindful that the Affordable Care Act (ACA) will create winners and losers among hospitals. Two years after its implementation, the ACA is still an evolving story. Today, while the bond market does not make much of a distinction among hospital credits with similar ratings, we heavily scrutinize the business conditions faced by each hospital.
Beyond credit, we have had success enhancing the Fund’s yield by way of bonds with embedded calls. We are favoring bonds where we may give up some upside should interest rates fall dramatically from here in exchange for providing higher current yield.
We expect income generation to be the key element in fixed income returns during 2016. At a time of increased volatility, 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,
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.
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Municipal Bonds — 98.8% | | | | | | | | |
| | | | | | | | | |
| General Obligation Bonds — 41.6% | | | | | | | | |
| | 2,225,000 | | Anne Arundel County Maryland Consolidated General Improvements | | 5.00 | % | | 04/01/2022 | | | 2,689,046 | |
| | 500,000 | | Baltimore County Maryland Consolidated Public Improvement | | 5.00 | % | | 08/01/2016 | | | 513,640 | |
| | 450,000 | | Baltimore County Maryland Consolidated Public Improvement Series A | | 3.00 | % | | 10/15/2016 | | | 459,126 | |
| | 575,000 | | Baltimore County Maryland Consolidated Public Improvement Series A | | 5.00 | % | | 11/01/2017 | | | 619,327 | |
| | 3,000,000 | | Baltimore County Maryland Consolidated Public Improvement | | 4.50 | % | | 09/01/2020 | | | 3,446,460 | |
| | 1,305,000 | | Baltimore Maryland | | 5.00 | % | | 10/15/2018 | | | 1,448,602 | |
| | 1,390,000 | | Charles County Maryland | | 5.00 | % | | 11/01/2019 | | | 1,592,704 | |
| | 1,970,000 | | Charles County Maryland | | 5.00 | % | | 11/01/2021 | | | 2,368,098 | |
| | 1,145,000 | | Easton Maryland, Town of | | 4.00 | % | | 02/01/2020 | | | 1,270,950 | |
| | 1,145,000 | | Easton Maryland, Town of | | 4.00 | % | | 02/01/2021 | | | 1,293,300 | |
| | 1,000,000 | | Howard County Maryland | | 4.00 | % | | 04/15/2017 | | | 1,043,290 | |
| | 945,000 | | Maryland National Capital Park & Planning Commission | | 3.00 | % | | 01/15/2016 | | | 946,087 | |
| | 1,120,000 | | Maryland National Capital Park & Planning Commission | | 5.00 | % | | 01/15/2019 | | | 1,253,291 | |
| | 1,085,000 | | Maryland National Capital Park & Planning Commission | | 5.00 | % | | 01/15/2020 | | | 1,250,104 | |
| | 500,000 | | Maryland State | | 5.00 | % | | 08/01/2016 | | | 513,640 | |
| | 715,000 | | Maryland State | | 5.25 | % | | 03/01/2017 | | | 753,746 | |
| | 1,000,000 | | Maryland State 1st Series B | | 5.00 | % | | 03/15/2017 | | | 1,052,830 | |
| | 835,000 | | Maryland State 2nd Series B | | 5.25 | % | | 08/15/2017 | | | 895,963 | |
| | 1,000,000 | | Maryland State | | 4.50 | % | | 08/01/2019 | | | 1,119,440 | |
| | 3,145,000 | | Maryland State | | 5.00 | % | | 08/01/2023 | | | 3,898,133 | |
| | 1,945,000 | | Maryland State | | 5.00 | % | | 08/01/2023 | | | 2,356,640 | |
| | 10,000,000 | | Maryland State | | 5.00 | % | | 08/01/2024 | | | 12,572,000 | |
| | 7,500,000 | | Montgomery County Maryland | | 5.00 | % | | 11/01/2023 | | | 9,332,625 | |
| | 5,000,000 | | Montgomery County Maryland | | 5.00 | % | | 12/01/2024 | | | 6,204,000 | |
| | 825,000 | | Montgomery County Maryland Consolidated Public Improvement | | 5.00 | % | | 11/01/2016 | | | 856,383 | |
| | 3,320,000 | | Prince George’s County Maryland | | 5.00 | % | | 09/15/2026 | | | 3,956,245 | |
| | 800,000 | | Prince Georges County Maryland Public Improvement Series A | | 5.00 | % | | 09/01/2016 | | | 824,736 | |
| | 1,380,000 | | Talbot County Maryland | | 5.00 | % | | 12/15/2018 | | | 1,541,239 | |
| | 1,270,000 | | Talbot County Maryland | | 5.00 | % | | 12/15/2019 | | | 1,459,967 | |
| | 200,000 | | Washington Suburban Sanitary District | | 5.00 | % | | 06/01/2016 | | | 203,962 | |
| | 1,215,000 | | Washington Suburban Sanitary District | | 5.00 | % | | 06/01/2017 | | | 1,289,164 | |
| | 1,645,000 | | Washington Suburban Sanitary District | | 5.00 | % | | 06/01/2023 | | | 2,033,384 | |
| | 1,940,000 | | Wicomico County Maryland | | 4.00 | % | | 11/01/2019 | | | 2,145,679 | |
| | 1,985,000 | | Wicomico County Maryland | | 4.00 | % | | 11/01/2020 | | | 2,237,055 | |
| | 2,225,000 | | Worcester County | | 5.00 | % | | 03/01/2023 | | | 2,728,584 | |
| | | | | | | | | | | | 78,169,440 | |
| Refunded Bonds — 0.9% | | | | | | | | | |
| | 180,000 | | Frederick County Maryland Prerefunded Consolidated Public Improvement Series | | 4.00 | % | | 02/01/2016 | | | 180,567 | |
| | 35,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2018 | | | 37,228 | |
| | 445,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2023 | | | 455,066 | |
| | 240,000 | | Maryland State Health & Higher Educational Facilities Series A | | 5.00 | % | | 01/01/2025 | | | 245,429 | |
| | 515,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 01/01/2026 | | | 526,649 | |
| | 365,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2026 | | | 373,256 | |
| | | | | | | | | | | | 1,818,195 | |
| Revenue Bonds — 56.3% | | | | | | | | | |
| | 500,000 | | Alexandria Industrial Development Authority | | 5.00 | % | | 10/01/2030 | | | 557,320 | |
| | 500,000 | | Baltimore County Maryland Economic Development Various Garrison Forest School Incorporate# | | 3.00 | % | | 10/01/2031 | | | 506,260 | |
| | 520,000 | | Baltimore Maryland | | 5.00 | % | | 06/15/2030 | | | 583,159 | |
| | 670,000 | | Baltimore Maryland | | 5.00 | % | | 06/15/2033 | | | 744,551 | |
| | 405,000 | | Baltimore Maryland Wastewater Project Series A | | 3.40 | % | | 07/01/2016 | | | 411,124 | |
| | 255,000 | | Chicago Illinois Midway International Airport | | 5.00 | % | | 01/01/2027 | | | 295,950 | |
| | 1,500,000 | | Chicago O’Hare International Airport | | 5.00 | % | | 01/01/2038 | | | 1,589,610 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | | |
| | | | | | | | | |
| Revenue Bonds — (Continued) | | | | | | | | |
| | 2,395,000 | | Clark County Maryland Department of Aviation | | 5.00 | % | | 07/01/2025 | | | 2,515,397 | |
| | 1,550,000 | | Franklin County Health Care Facilities Friendship Village | | 5.00 | % | | 11/15/2034 | | | 1,707,929 | |
| | 2,420,000 | | Frederick County Maryland Special Obligation Subordinated Urbana | | | | | | | | | |
| | | | Community Development Authority Series B | | 5.50 | % | | 07/01/2040 | | | 2,549,228 | |
| | 900,000 | | Houston Texas Airport System | | 5.00 | % | | 07/15/2020 | | | 968,319 | |
| | 1,100,000 | | Houston Texas Airport System | | 5.00 | % | | 07/15/2020 | | | 1,169,674 | |
| | 550,000 | | Idaho Health Facilities Authority Revenue Series A | | 5.00 | % | | 03/01/2034 | | | 614,135 | |
| | 750,000 | | Indiana Finance Authority Series A | | 5.00 | % | | 09/15/2028 | | | 842,617 | |
| | 2,250,000 | | Lees Summit Industrial Development Authority | | 5.13 | % | | 08/15/2032 | | | 2,309,422 | |
| | 500,000 | | Maryland Economic Development Corp. | | 5.00 | % | | 06/01/2022 | | | 508,065 | |
| | 1,185,000 | | Maryland Economic Development Corp. | | 5.25 | % | | 07/01/2024 | | | 1,251,490 | |
| | 1,025,000 | | Maryland Economic Development Corp. # | | 2.55 | % | | 12/01/2025 | | | 1,035,476 | |
| | 700,000 | | Maryland Economic Development Corp. | | 5.00 | % | | 06/01/2027 | | | 767,942 | |
| | 400,000 | | Maryland Economic Development Corp. | | 5.00 | % | | 07/01/2027 | | | 440,356 | |
| | 850,000 | | Maryland Economic Development Corp. | | 5.00 | % | | 07/01/2031 | | | 926,560 | |
| | 2,300,000 | | Maryland Economic Development Corp. | | 5.75 | % | | 06/01/2035 | | | 2,517,879 | |
| | 2,500,000 | | Maryland Industrial Development Financing Authority Series B # | | 0.95 | % | | 09/01/2040 | | | 2,497,400 | |
| | 440,000 | | Maryland State Community Development Administration | | 0.25 | % | | 03/01/2016 | | | 440,035 | |
| | 250,000 | | Maryland State Community Development Administration | | 0.40 | % | | 09/01/2016 | | | 249,897 | |
| | 1,000,000 | | Maryland State Department of Transportation | | 5.50 | % | | 02/01/2017 | | | 1,053,080 | |
| | 2,000,000 | | Maryland State Department of Transportation | | 5.00 | % | | 05/01/2017 | | | 2,115,680 | |
| | 1,500,000 | | Maryland State Department of Transportation | | 5.00 | % | | 06/01/2017 | | | 1,591,560 | |
| | 500,000 | | Maryland State Department of Transportation | | 4.00 | % | | 05/15/2020 | | | 519,700 | |
| | 1,000,000 | | Maryland State Department of Transportation | | 5.00 | % | | 12/15/2020 | | | 1,179,920 | |
| | 1,395,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 01/01/2018 | | | 1,466,396 | |
| | 215,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2018 | | | 227,623 | |
| | 260,000 | | Maryland State Health & Higher Educational Facilities Series F | | 5.00 | % | | 07/01/2018 | | | 282,950 | |
| | 1,000,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2023 | | | 1,145,990 | |
| | 500,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 08/15/2023 | | | 598,480 | |
| | 650,000 | | Maryland State Health & Higher Educational Facilities Series A | | 5.20 | % | | 01/01/2024 | | | 665,353 | |
| | 500,000 | | Maryland State Health & Higher Educational Facilities | | 5.50 | % | | 07/01/2024 | | | 543,255 | |
| | 500,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2024 | | | 558,975 | |
| | 1,000,000 | | Maryland State Health & Higher Educational Facilities | | 6.00 | % | | 07/01/2025 | | | 1,148,890 | |
| | 1,500,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2025 | | | 1,745,070 | |
| | 1,250,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2025 | | | 1,446,513 | |
| | 420,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2026 | | | 496,041 | |
| | 1,605,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2028 | | | 1,873,099 | |
| | 100,000 | | Maryland State Health & Higher Educational Facilities | | 4.00 | % | | 10/01/2030 | | | 108,484 | |
| | 1,130,000 | | Maryland State Health & Higher Educational Facilities | | 6.25 | % | | 07/01/2031 | | | 1,296,110 | |
| | 300,000 | | Maryland State Health & Higher Educational Facilities | | 4.00 | % | | 10/01/2031 | | | 323,646 | |
| | 1,250,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 08/15/2033 | | | 1,437,950 | |
| | 250,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 07/01/2034 | | | 270,298 | |
| | 200,000 | | Maryland State Health & Higher Educational Facilities | | 4.50 | % | | 07/01/2035 | | | 202,650 | |
| | 3,000,000 | | Maryland State Health & Higher Educational Facilities | | 5.25 | % | | 01/01/2037 | | | 3,355,590 | |
| | 3,400,000 | | Maryland State Health & Higher Educational Facilities | | 5.00 | % | | 05/15/2040 | | | 3,742,482 | |
| | 5,005,000 | | Maryland State Health & Higher Educational Facilities — Mercy Medical Center | | 5.00 | % | | 07/01/2037 | | | 5,231,476 | |
| | 750,000 | | Maryland State Transportation Authority Series A | | 3.00 | % | | 07/01/2016 | | | 760,073 | |
| | 4,255,000 | | Maryland State Transportation Authority | | 5.00 | % | | 03/01/2022 | | | 5,029,708 | |
| | 9,000,000 | | Maryland State Transportation Authority | | 5.00 | % | | 07/01/2036 | | | 9,786,330 | |
| | 2,820,000 | | Maryland State Water Quality Financing | | 5.00 | % | | 03/01/2017 | | | 2,964,158 | |
| | 4,000,000 | | Miami-Dade County Florida Aviation | | 5.25 | % | | 10/01/2026 | | | 4,248,840 | |
| | 630,000 | | Nassau County Local Economic Assistance Corp. | | 5.00 | % | | 07/01/2026 | | | 730,334 | |
| | 1,750,000 | | New Hope Cultural Education Facilities Corp. | | 5.00 | % | | 07/01/2025 | | | 1,953,333 | |
| | 2,000,000 | | New York City Industrial Development Agency# | | 2.00 | % | | 08/01/2028 | | | 2,004,320 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par | | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | | |
| | | | | | | | | |
| Revenue Bonds — (Continued) | | | | | | | | |
| | 2,275,000 | | Pennsylvania Economic Development Financing Authority# | | 2.25 | % | | 07/01/2041 | | | 2,307,260 | |
| | 1,000,000 | | Pompano Beach, Florida | | 5.00 | % | | 09/01/2044 | | | 1,071,440 | |
| | 1,000,000 | | Private Colleges & Universities Authority | | 5.00 | % | | 04/01/2023 | | | 1,165,010 | |
| | 880,000 | | San Antonio Texas Airport System | | 5.00 | % | | 07/01/2023 | | | 1,041,858 | |
| | 925,000 | | San Antonio Texas Airport System | | 5.00 | % | | 07/01/2024 | | | 1,097,994 | |
| | 1,000,000 | | University System of Maryland | | 5.00 | % | | 04/01/2016 | | | 1,012,100 | |
| | 3,000,000 | | Washington Metropolitan Area Transit Authority | | 5.25 | % | | 07/01/2025 | | | 3,388,500 | |
| | 4,000,000 | | Wisconsin, State of | | 5.75 | % | | 05/01/2033 | | | 4,591,520 | |
| | | | | | | | | | | | 105,779,834 | |
| Total Municipal Bonds (Cost $183,027,254) | | | | | | | | 185,767,469 | |
| | | | | | | | | | |
| Short-Term Investments — 0.8% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Funds — 0.8% | | | | | | | | | |
| | 1,467,561 | | DWS Cash Account Trust — Tax-Exempt Portfolio — Institutional Shares, 0.01%* | | | | | | | | 1,467,561 | |
| Total Short-Term Investments (Cost $1,467,561) | | | | | | | | 1,467,561 | |
| Total Investments — 99.6% (Cost $184,494,815) | | | | | | | | 187,235,030 | |
| Other Assets in Excess of Liabilities — 0.4% | | | | | | | | 739,915 | |
| TOTAL NET ASSETS — 100.0% | | | | | | | $ | 187,974,945 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Revenue Bonds | 56.3% |
| General Obligation Bonds | 41.6% |
| Refunded Bonds | 0.9% |
| Money Market Funds | 0.8% |
| Other Assets and Liabilities | 0.4% |
| | 100.0% |
| # | Variable rate security. Rate disclosed is as of December 31, 2015. |
| * | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Tax Exempt Bond Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Tax Exempt Bond Fund (the “Fund”) rose 2.15%, slightly outperforming the Barclays 1-10 Year Blended Municipal Bond Index (the “Index”), the Fund’s benchmark, which increased 2.12%.
The fourth quarter of 2015 was marked by substantial volatility in fixed income markets, capping off a full year of high uncertainty. The Federal Reserve raised its benchmark interest rate target on December 16, ending months of speculation about exactly when the central bank would begin the process of rate normalization. After all the consternation on the issue during the summer and fall, the increase in the main interest rate did not trigger much impact in the market. Looking forward to 2016, we are agnostic on how Federal Reserve policy will evolve. Policymakers’ vacillation on the timing of liftoff damaged their credibility, and the continued uncertainty about the outlook for the economy makes projecting interest rates extremely challenging. To achieve our investment objectives, we prefer to focus our efforts on fundamental analysis and credit selection.
Sector and individual credit selection has been the largest positive contributor to the Fund’s performance. The Fund increased its 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 were the largest contributor. On a combined basis, these holdings returned 4.48% for the 6-month period compared with the Index’s health care return of 2.20%. This relative performance combined with a 17% sector overweight, contributed 88 basis points of relative contribution for the portfolio. Other notable positive contributions were gained from transportation (+3.04%), public power (+2.98%), and corporate-backed (+2.42%).
Looking forward into 2016, we are becoming increasingly selective in the tax-exempt health care space. While we still see good value in select credits, the Affordable Care Act will definitely create winners and losers among hospitals. Even now, two years after the ACA implementation began, it continues to be an evolving story. Today, the bond market is not making much of a distinction among hospital credits with similar ratings, but we continue to heavily scrutinize the business conditions faced by each individual hospital.
Beyond credit, we have had success enhancing the Fund’s yield by way of bonds with embedded calls. We are favoring bonds where we may give up some upside should interest rates fall dramatically from here in exchange for providing higher current yield.
We expect income generation to be the key element in fixed income returns during 2016. At a time of increased volatility, 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,
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. 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.
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Municipal Bonds — 97.6% | | | | | | | | |
| | | | | | | | | |
| General Obligation Bonds — 12.7% | | | | | | | | |
| | 1,885,000 | | Beaver Area School District | | 3.00 | % | | 09/01/2017 | | | 1,952,766 | |
| | 1,000,000 | | Cheshire Connecticut, County of | | 5.00 | % | | 10/01/2021 | | | 1,189,830 | |
| | 1,150,000 | | Clark County School District | | 5.00 | % | | 06/15/2025 | | | 1,247,842 | |
| | 2,500,000 | | Commonwealth of Pennsylvania | | 5.00 | % | | 04/15/2022 | | | 2,797,675 | |
| | 1,320,000 | | Connecticut, State of | | 5.00 | % | | 10/15/2022 | | | 1,583,221 | |
| | 2,700,000 | | District of Columbia | | 5.00 | % | | 06/01/2022 | | | 2,860,056 | |
| | 750,000 | | Jefferson County Board of Education | | 4.00 | % | | 05/01/2017 | | | 780,300 | |
| | 1,325,000 | | Kaufman, County of | | 3.00 | % | | 02/15/2018 | | | 1,372,422 | |
| | 890,000 | | Oil City Area School District | | 0.60 | % | | 05/15/2016 | | | 889,715 | |
| | 5,000,000 | | Pennsylvania, Commonwealth of | | 5.00 | % | | 08/15/2022 | | | 5,992,500 | |
| | 2,065,000 | | Pierce Washington, County of | | 3.00 | % | | 08/01/2017 | | | 2,130,853 | |
| | 1,570,000 | | Pratville Alabama | | 3.00 | % | | 11/01/2017 | | | 1,628,420 | |
| | 1,745,000 | | San Antonio Texas Independent School District | | 5.00 | % | | 02/15/2022 | | | 2,100,963 | |
| | 1,000,000 | | Sugar Land Texas, City of | | 5.00 | % | | 02/15/2023 | | | 1,220,480 | |
| | 685,000 | | West Contra Costa Unified School District | | 4.00 | % | | 08/01/2017 | | | 718,360 | |
| | | | | | | | | | | | 28,465,403 | |
| Refunded Bonds — 3.1% | | | | | | | | | |
| | 1,000,000 | | North Carolina Eastern Municipal Power Agency | | 5.00 | % | | 01/01/2021 | | | 1,179,350 | |
| | 5,000,000 | | Tarrant County Cultural Education Facilities Finance Corp. | | 5.75 | % | | 11/15/2024 | | | 5,658,550 | |
| | | | | | | | | | | | 6,837,900 | |
| Revenue Bonds — 81.8% | | | | | | | | | |
| | 1,500,000 | | Alabama 21st Century Authority — Tobacco Settlement | | 5.00 | % | | 06/01/2017 | | | 1,584,465 | |
| | 550,000 | | AltaPointe Health Systems, Inc. | | 3.00 | % | | 05/01/2019 | | | 559,707 | |
| | 565,000 | | AltaPointe Health Systems, Inc. | | 3.00 | % | | 05/01/2020 | | | 573,000 | |
| | 2,970,000 | | Central Texas Turnpike System | | 5.00 | % | | 08/15/2027 | | | 3,459,070 | |
| | 3,000,000 | | Chicago Midway International Airport | | 5.00 | % | | 01/01/2028 | | | 3,453,870 | |
| | 700,000 | | Chicago O’Hare International Airport | | 5.00 | % | | 01/01/2021 | | | 798,735 | |
| | 600,000 | | Chicago O’Hare International Airport | | 5.00 | % | | 01/01/2022 | | | 694,314 | |
| | 820,000 | | Chicago O’Hare International Airport | | 5.00 | % | | 01/01/2023 | | | 958,924 | |
| | 1,500,000 | | Chicago O’Hare International Airport | | 5.00 | % | | 01/01/2038 | | | 1,589,610 | |
| | 660,000 | | Chula Vista Municipal Financing Authority | | 4.00 | % | | 09/01/2018 | | | 702,121 | |
| | 855,000 | | Chula Vista Municipal Financing Authority | | 4.00 | % | | 09/01/2019 | | | 922,793 | |
| | 2,100,000 | | Chula Vista Municipal Financing Authority | | 5.00 | % | | 09/01/2023 | | | 2,479,113 | |
| | 450,000 | | City & Country of Denver CO | | 5.25 | % | | 10/01/2032 | | | 466,645 | |
| | 2,000,000 | | City & County of Denver CO Airport System Revenue | | 5.00 | % | | 11/15/2024 | | | 2,132,400 | |
| | 5,000,000 | | Clark County Maryland Department of Aviation | | 5.00 | % | | 07/01/2025 | | | 5,251,350 | |
| | 300,000 | | Colorado Health Facilities Authority | | 5.00 | % | | 12/01/2020 | | | 335,286 | |
| | 1,000,000 | | Colorado Health Facilities Authority | | 5.00 | % | | 06/01/2027 | | | 1,122,850 | |
| | 1,000,000 | | Colorado Health Facilities Authority | | 5.00 | % | | 12/01/2035 | | | 1,088,020 | |
| | 1,300,000 | | Colorado Health Facilities Authority Revenue Series A | | 5.00 | % | | 12/01/2027 | | | 1,408,797 | |
| | 1,700,000 | | Educational Enhancement Funding Corp. | | 5.00 | % | | 06/01/2023 | | | 1,987,538 | |
| | 3,330,000 | | Florida Municipal Power Agency | | 5.25 | % | | 10/01/2023 | | | 3,683,613 | |
| | 3,355,000 | | Florida Municipal Power Agency | | 5.00 | % | | 10/01/2025 | | | 3,956,149 | |
| | 2,200,000 | | Franklin Ohio Health Care, County of | | 5.00 | % | | 11/15/2044 | | | 2,403,214 | |
| | 3,250,000 | | Hawaii Department of Budget & Finance | | 3.25 | % | | 01/01/2025 | | | 3,318,835 | |
| | 1,760,000 | | Hawaii Department of Budget & Finance | | 4.60 | % | | 05/01/2026 | | | 1,812,782 | |
| | 1,100,000 | | Houston Texas Airport System | | 5.00 | % | | 07/15/2020 | | | 1,169,674 | |
| | 900,000 | | Houston Texas Airport System | | 5.00 | % | | 07/15/2020 | | | 968,319 | |
| | 3,850,000 | | Houston Texas Airport System | | 5.00 | % | | 07/01/2029 | | | 4,182,909 | |
| | 1,000,000 | | Indiana Finance Authority | | 5.00 | % | | 09/15/2025 | | | 1,144,410 | |
| | 1,000,000 | | Indiana Finance Authority Series A | | 5.00 | % | | 09/15/2028 | | | 1,123,490 | |
| | 485,000 | | Indiana Finance Authority | | 5.13 | % | | 03/01/2030 | | | 510,385 | |
| | 1,500,000 | | IPS Multi-School Building Corp. | | 5.00 | % | | 07/15/2018 | | | 1,652,160 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | | |
| | | | | | | | | |
| Revenue Bonds — (Continued) | | | | | | | | |
| | 2,000,000 | | Kansas Development Finance Authority | | 5.00 | % | | 05/01/2017 | | | 2,110,260 | |
| | 955,000 | | Kentucky State Property & Building Commission | | 5.50 | % | | 11/01/2028 | | | 1,061,626 | |
| | 2,500,000 | | Lees Summit Industrial Development Authority | | 5.13 | % | | 08/15/2032 | | | 2,566,025 | |
| | 1,000,000 | | Louisiana Public Facilities Authority | | 5.00 | % | | 06/01/2036 | | | 1,105,060 | |
| | 1,500,000 | | Louisiana State Citizens Property Insurance Corp. | | 5.00 | % | | 06/01/2020 | | | 1,707,915 | |
| | 720,000 | | Love Field Airport Modernization Corp. | | 5.00 | % | | 11/01/2022 | | | 852,408 | |
| | 2,465,000 | | Lower Colorado River Authority | | 5.00 | % | | 05/15/2032 | | | 2,808,720 | |
| | 2,155,000 | | Massachusetts Health & Educational Facilities Authority | | 5.00 | % | | 10/01/2024 | | | 2,304,600 | |
| | 1,750,000 | | Miami Beach Florida Health Facilities | | 5.00 | % | | 11/15/2029 | | | 1,965,267 | |
| | 3,235,000 | | Miami-Dade County Florida Aviation | | 5.25 | % | | 10/01/2026 | | | 3,436,249 | |
| | 1,165,000 | | Mississippi Development Bank | | 5.50 | % | | 10/01/2021 | | | 1,349,198 | |
| | 1,505,000 | | Mississippi Development Bank | | 6.50 | % | | 10/01/2031 | | | 1,773,808 | |
| | 1,000,000 | | Mobile, Alabama# | | 1.63 | % | | 07/15/2034 | | | 1,005,350 | |
| | 1,500,000 | | Montgomery County Industrial Development Authority # | | 2.55 | % | | 06/01/2029 | | | 1,511,250 | |
| | 1,600,000 | | Mountain House Public Financing Authority | | 5.00 | % | | 12/01/2027 | | | 1,691,968 | |
| | 2,565,000 | | Mountain House Public Financing Authority | | 5.00 | % | | 12/01/2032 | | | 2,709,974 | |
| | 2,000,000 | | New Hope Cultural Education Facilities Corp. | | 5.00 | % | | 07/01/2024 | | | 2,235,220 | |
| | 1,900,000 | | New Hope Cultural Education Facilities Corp. | | 5.00 | % | | 08/01/2039 | | | 2,014,988 | |
| | 3,955,000 | | New Jersey Education Facilities Authority | | 5.00 | % | | 07/01/2023 | | | 4,668,996 | |
| | 1,500,000 | | New Jersey Health Care Facilities Financing Authority | | 5.63 | % | | 07/01/2032 | | | 1,744,500 | |
| | 1,650,000 | | New Jersey Health Care Facilities Financing Authority | | 6.63 | % | | 07/01/2038 | | | 1,825,807 | |
| | 1,000,000 | | New Mexico State Severance Tax Permanent Fund | | 5.00 | % | | 07/01/2020 | | | 1,161,460 | |
| | 2,400,000 | | New York City Industrial Development Agency # | | 2.00 | % | | 08/01/2028 | | | 2,405,184 | |
| | 1,000,000 | | New York Urban Development Corp. | | 5.00 | % | | 01/01/2021 | | | 1,098,440 | |
| | 1,760,000 | | Niagara County New York Tobacco | | 5.00 | % | | 05/15/2024 | | | 2,097,709 | |
| | 3,320,000 | | Norman Regional Hospital Authority | | 5.38 | % | | 09/01/2029 | | | 3,376,540 | |
| | 1,250,000 | | Palm Beach County Florida Health Corp. | | 5.00 | % | | 12/01/2031 | | | 1,410,387 | |
| | 1,000,000 | | Park Creek Metropolitan District | | 5.00 | % | | 12/01/2022 | | | 1,171,030 | |
| | 1,000,000 | | Park Creek Metropolitan District | | 5.00 | % | | 12/01/2034 | | | 1,136,410 | |
| | 3,000,000 | | Pennsylvania Economic Development Financing Authority# | | 2.25 | % | | 07/01/2041 | | | 3,042,540 | |
| | 1,900,000 | | Pennsylvania Turnpike Commission | | 5.00 | % | | 12/01/2030 | | | 2,137,158 | |
| | 1,920,000 | | Philadelphia Pennsylvania Airport | | 5.00 | % | | 06/15/2022 | | | 2,247,034 | |
| | 1,000,000 | | Pompano Beach, Florida | | 5.00 | % | | 09/01/2039 | | | 1,074,470 | |
| | 3,120,000 | | Pompano Beach, Florida | | 5.00 | % | | 09/01/2044 | | | 3,342,893 | |
| | 500,000 | | Port of Seattle Washington | | 5.00 | % | | 04/01/2022 | | | 588,360 | |
| | 5,000,000 | | Public Finance Authority | | 5.00 | % | | 06/01/2025 | | | 5,898,500 | |
| | 755,000 | | Railsplitter Tobacco Settlement Authority | | 5.00 | % | | 06/01/2017 | | | 795,340 | |
| | 895,000 | | Railsplitter Tobacco Settlement Authority | | 5.00 | % | | 06/01/2018 | | | 969,652 | |
| | 1,000,000 | | Saint Louis Missouri Parking Revenue | | 5.00 | % | | 12/15/2021 | | | 1,173,510 | |
| | 510,000 | | San Antonio Texas Airport System | | 5.00 | % | | 07/01/2020 | | | 580,839 | |
| | 795,000 | | San Antonio Texas Airport System | | 5.00 | % | | 07/01/2021 | | | 921,787 | |
| | 835,000 | | San Antonio Texas Airport System | | 5.00 | % | | 07/01/2022 | | | 981,985 | |
| | 1,000,000 | | South Carolina Ports Authority | | 5.00 | % | | 07/01/2026 | | | 1,187,470 | |
| | 250,000 | | South Carolina Ports Authority | | 5.00 | % | | 07/01/2028 | | | 291,742 | |
| | 400,000 | | South Carolina Ports Authority | | 5.00 | % | | 07/01/2029 | | | 464,992 | |
| | 1,500,000 | | Texas Tech University | | 4.25 | % | | 08/15/2021 | | | 1,721,100 | |
| | 5,000,000 | | Tobacco Settlement Authority | | 5.00 | % | | 06/01/2017 | | | 5,273,550 | |
| | 1,115,000 | | Tobacco Settlement Authority | | 5.25 | % | | 06/01/2032 | | | 1,255,568 | |
| | 2,000,000 | | Tobacco Settlement Financing Corp. | | 5.00 | % | | 06/01/2017 | | | 2,115,360 | |
| | 2,550,000 | | Tobacco Settlement Financing Corp. Louisiana Revenue Bonds | | 5.00 | % | | 05/15/2019 | | | 2,839,706 | |
| | 4,310,000 | | University of North Florida Financing Corp. | | 5.00 | % | | 11/01/2026 | | | 4,602,046 | |
| | 820,000 | | Vigo, County of | | 2.00 | % | | 01/15/2017 | | | 829,938 | |
| | 830,000 | | Vigo, County of | | 2.00 | % | | 07/15/2017 | | | 843,114 | |
| | 1,295,000 | | Warren County Justice Center Expansion Corp. | | 5.00 | % | | 09/01/2024 | | | 1,571,664 | |
| | 5,000,000 | | Washington Convention & Sports Authority | | 5.00 | % | | 10/01/2025 | | | 5,168,350 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par | | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Municipal Bonds — (Continued) | | | | | | | | |
| | | | | | | | | |
| Revenue Bonds — (Continued) | | | | | | | | |
| | 1,505,000 | | Washoe, County of Nevada | | 5.00 | % | | 02/01/2043 | | | 1,648,186 | |
| | 970,000 | | Wayne County Michigan Airport | | 5.75 | % | | 12/01/2024 | | | 1,077,495 | |
| | 1,360,000 | | Wisconsin Health & Educational Facilities Authority | | 5.00 | % | | 05/01/2027 | | | 1,510,987 | |
| | 1,730,000 | | Wisconsin Health & Educational Facilities Authority | | 5.00 | % | | 08/15/2028 | | | 1,920,404 | |
| | 650,000 | | Wisconsin Health & Educational Facilities Authority | | 5.00 | % | | 09/15/2037 | | | 695,955 | |
| | 1,000,000 | | Wisconsin Health & Educational Facilities Authority | | 5.00 | % | | 09/15/2045 | | | 1,065,820 | |
| | 4,500,000 | | Wisconsin, State of | | 5.75 | % | | 05/01/2033 | | | 5,165,460 | |
| | 4,275,000 | | Wisconsin, State of | | 6.00 | % | | 05/01/2036 | | | 4,934,419 | |
| | | | | | | | | | | | 183,738,291 | |
| Total Municipal Bonds (Cost $217,149,283) | | | | | | | | 219,041,594 | |
| | | | | | | | | | |
| Short-Term Investments — 1.2% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Funds — 1.2% | | | | | | | | | |
| | 2,779,809 | | DWS Cash Account Trust — Tax-Exempt Portfolio — Institutional Shares, 0.01%* | | | | | | | | 2,779,809 | |
| Total Short-Term Investments Fund (Cost $2,779,809) | | | | | | | | 2,779,809 | |
| Total Investments — 98.8% (Cost $219,929,092) | | | | | | | | 221,821,403 | |
| Other Assets in Excess of Liabilities — 1.2% | | | | | | | | 2,757,079 | |
| TOTAL NET ASSETS — 100.0% | | | | | | | $ | 224,578,482 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Revenue Bonds | 81.8% |
| General Obligation Bonds | 12.7% |
| Refunded Bonds | 3.1% |
| Money Market Funds | 1.2% |
| Other Assets and Liabilities | 1.2% |
| | 100.0% |
| # | Variable rate security. Rate disclosed is as of December 31, 2015. |
| * | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Mortgage Securities Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ending December, 31, 2015, the Brown Advisory Mortgage Securities Fund Institutional Shares (the “Fund”) rose 1.04%, slightly trailing the Barclays Mortgage Backed Securities Index, the Fund’s benchmark, which increased 1.20%.
The Fund’s investment process is centered on finding mortgage-related bonds that we believe will enjoy attractive speeds in principal payment. This involves finding pools where the characteristics of the underlying borrowers suggest they have comparatively low incentives to refinance into new loans. This includes loans with smaller loan balances, lower equity, recent purchases, etc. During 2015, the Fund’s holdings in mortgage pass-throughs were slower than a coupon-matched average of generic Mortgage Backed Securities (“MBS”) every month. The Conditional Prepayment Rate (CPR) for our pools averaged 5.0 during the year compared with 14.6 for coupon-matched generics. This slower rate of repayment allows the fund to collect more income, which we believe is the most consistent way to deliver performance in mortgage-backed bonds.
Our preference for conventional mortgages, those backed by Fannie Mae and Freddie Mac, over bonds issued by Ginnie Mae, backed explicitly by the U.S. Government, posed a mild negative for the period. We select our mortgage positions based on a bottom-up process that is most effective in conventional mortgages and generally there is more opportunity for differentiation in conventional MBS. Our strong income was able to mostly offset this price fluctuation. While there are times when Ginnie Mae prices will outperform or underperform, we are focused on the long-run advantages afforded by attractive prepayment analysis.
We used the period of rising interest rates toward the end of 2015 to exit positions that performed well in this sell off. We are re-deploying those proceeds into securities that are now less expensive, such as agency commercial-backed securities, a segment we had avoided until now. The core of our investment process will remain focused on prepayment analysis, where we believe we have the best probability of delivering attractive investment performance.
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.
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.
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Mortgage Backed Securities — 98.7% | | | | | | | | |
| | 31,043 | | Federal Home Loan Banks, Series SB-2016 | | 4.89 | % | | 12/23/2016 | | | 31,886 | |
| | 105,539 | | Federal Home Loan Banks, Series MI-2017 | | 4.78 | % | | 01/25/2017 | | | 108,440 | |
| | 13,500,000 | | FGLMC, 3.5%, Due TBA January | | 3.50 | % | | 01/15/2046 | | | 13,897,748 | |
| | 121 | | FHLMC PC, Pool# G1-1357 | | 5.50 | % | | 01/01/2018 | | | 124 | |
| | 656 | | FHLMC PC, Pool# E0-1488 | | 5.00 | % | | 10/01/2018 | | | 678 | |
| | 339 | | FHLMC PC, Pool# C9-0242 | | 6.00 | % | | 12/01/2018 | | | 380 | |
| | 9,204 | | FHLMC PC, Pool# G1-1778 | | 5.50 | % | | 10/01/2020 | | | 9,830 | |
| | 235 | | FHLMC PC, Pool# G1-1924 | | 5.50 | % | | 03/01/2021 | | | 251 | |
| | 807 | | FHLMC PC, Pool# C9-0428 | | 6.00 | % | | 03/01/2021 | | | 906 | |
| | 66 | | FHLMC PC, Pool# J0-1540 | | 5.00 | % | | 04/01/2021 | | | 68 | |
| | 888 | | FHLMC PC, Pool# G1-2110 | | 5.50 | % | | 06/01/2021 | | | 951 | |
| | 1,012 | | FHLMC PC, Pool# G1-2522 | | 5.00 | % | | 02/01/2022 | | | 1,084 | |
| | 1,738 | | FHLMC PC, Pool# G1-2600 | | 5.50 | % | | 03/01/2022 | | | 1,884 | |
| | 1,152 | | FHLMC PC, Pool# G1-2710 | | 5.50 | % | | 07/01/2022 | | | 1,245 | |
| | 74 | | FHLMC PC, Pool# 84-5640 # | | 2.42 | % | | 08/01/2023 | | | 77 | |
| | 18,206 | | FHLMC PC, Pool# G1-3584 | | 4.50 | % | | 06/01/2024 | | | 19,550 | |
| | 39,630 | | FHLMC PC, Pool# J1-1196 | | 4.50 | % | | 11/01/2024 | | | 42,461 | |
| | 7 | | FHLMC PC, Pool# C3-6309 | | 7.00 | % | | 02/01/2030 | | | 7 | |
| | 1,793,266 | | FHLMC PC, Pool# J3-2596 | | 3.50 | % | | 08/01/2030 | | | 1,879,944 | |
| | 2,872,118 | | FHLMC PC, Pool# J3-2379 | | 3.50 | % | | 08/01/2030 | | | 3,013,570 | |
| | 1,177,717 | | FHLMC PC, Pool# J3-2643 | | 3.50 | % | | 09/01/2030 | | | 1,235,773 | |
| | 11 | | FHLMC PC, Pool# C5-8701 | | 7.00 | % | | 10/01/2031 | | | 11 | |
| | 76 | | FHLMC PC, Pool# G0-1317 | | 7.00 | % | | 10/01/2031 | | | 90 | |
| | 42 | | FHLMC PC, Pool# G0-1391 | | 7.00 | % | | 04/01/2032 | | | 50 | |
| | 175,562 | | FHLMC PC, Pool# 1B0889 # | | 2.27 | % | | 05/01/2033 | | | 185,449 | |
| | 18,269 | | FHLMC PC, Pool# 1B-1275 # | | 2.60 | % | | 10/01/2033 | | | 19,363 | |
| | 3,827,626 | | FHLMC PC, Pool# C9-1818 | | 4.00 | % | | 02/01/2035 | | | 4,092,378 | |
| | 259,442 | | FHLMC PC, Pool# 1J0203 # | | 2.28 | % | | 04/01/2035 | | | 275,566 | |
| | 1,188 | | FHLMC PC, Pool# A4-6671 | | 5.00 | % | | 08/01/2035 | | | 1,301 | |
| | 1,451 | | FHLMC PC, Pool# G0-8079 | | 5.00 | % | | 09/01/2035 | | | 1,595 | |
| | 13,551 | | FHLMC PC, Pool# 1B-3950 # | | 3.71 | % | | 11/01/2035 | | | 13,563 | |
| | 83,779 | | FHLMC PC, Pool# 1L-1263 # | | 2.50 | % | | 03/01/2036 | | | 89,032 | |
| | 11,648 | | FHLMC PC, Pool# 1J-1317 # | | 2.42 | % | | 04/01/2036 | | | 12,379 | |
| | 4,817 | | FHLMC PC, Pool# 1G-2408 # | | 2.19 | % | | 06/01/2036 | | | 5,095 | |
| | 11,999 | | FHLMC PC, Pool# 84-7625 # | | 2.03 | % | | 07/01/2036 | | | 12,619 | |
| | 8,743 | | FHLMC PC, Pool# G0-2274 | | 5.00 | % | | 07/01/2036 | | | 9,608 | |
| | 375 | | FHLMC PC, Pool# A5-9220 | | 5.00 | % | | 04/01/2037 | | | 410 | |
| | 6,955 | | FHLMC PC, Pool# 1J-0573 # | | 2.72 | % | | 08/01/2037 | | | 7,426 | |
| | 4,596 | | FHLMC PC, Pool# 1B-4292 # | | 2.66 | % | | 09/01/2038 | | | 4,782 | |
| | 1,115,711 | | FHLMC PC, Pool# Q2-6108 | | 5.00 | % | | 05/01/2044 | | | 1,221,156 | |
| | 1,023,443 | | FHLMC PC, Pool# Q2-9637 | | 4.50 | % | | 11/01/2044 | | | 1,109,575 | |
| | 3,303,106 | | FHLMC PC, Pool# Q3-2218 | | 4.00 | % | | 03/01/2045 | | | 3,496,196 | |
| | 1,864,140 | | FHLMC PC, Pool# Q3-6224 | | 4.00 | % | | 09/01/2045 | | | 1,971,835 | |
| | 1,800,865 | | FHLMC PC, Pool# Q3-7804 | | 4.00 | % | | 12/01/2045 | | | 1,904,771 | |
| | 11,917,923 | | FHLMC REMIC, Series 4318~ | | 2.50 | % | | 08/15/2022 | | | 794,995 | |
| | 5,000,000 | | FHLMC REMIC, Series K-721 | | 3.09 | % | | 08/25/2022 | | | 5,142,311 | |
| | 9,137,861 | | FHLMC REMIC, Series 4329~ | | 2.50 | % | | 01/15/2023 | | | 660,981 | |
| | 163,415 | | FHLMC REMIC, Series 3571 | | 4.00 | % | | 09/15/2024 | | | 172,742 | |
| | 3,760,000 | | FHLMC REMIC, Series K-040 | | 3.24 | % | | 09/25/2024 | | | 3,858,040 | |
| | 2,400,000 | | FHLMC REMIC, Series K-049 | | 3.01 | % | | 07/25/2025 | | | 2,401,200 | |
| | 2,165,128 | | FHLMC REMIC, Series 4092~ | | 3.00 | % | | 09/15/2031 | | | 251,717 | |
| | 8,889,313 | | FHLMC REMIC, Series 4186~ | | 3.00 | % | | 03/15/2033 | | | 1,319,066 | |
| | 7,764,886 | | FHLMC REMIC, Series 4203~ | | 3.00 | % | | 04/15/2033 | | | 891,112 | |
| | 3,144,138 | | FHLMC REMIC, Series 4309~ | | 3.00 | % | | 08/15/2039 | | | 438,449 | |
| | 478,714 | | FHLMC REMIC, Series 3878 | | 3.00 | % | | 04/15/2041 | | | 491,942 | |
| | 1,943,640 | | FHLMC REMIC, Series 4144 | | 2.50 | % | | 12/15/2042 | | | 1,721,431 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Mortgage Backed Securities — (Continued) | | | | | | | | |
| | 5,514,837 | | FHLMC REMIC, Series 4144 | | 2.50 | % | | 12/15/2042 | | | 4,889,819 | |
| | 2,292,400 | | FHLMC REMIC, Series 4153 | | 2.50 | % | | 01/15/2043 | | | 1,998,392 | |
| | 13,912,248 | | FHLMC REMIC, Series 4495 | | 2.50 | % | | 07/15/2045 | | | 13,431,869 | |
| | 5,375,322 | | FHLMC REMIC, Series 4495~ | | 3.50 | % | | 07/15/2045 | | | 1,050,473 | |
| | 372 | | FNMA, Pool# 576086 | | 6.00 | % | | 03/01/2016 | | | 372 | |
| | 12,706 | | FNMA, Pool# 254089 | | 6.00 | % | | 12/01/2016 | | | 12,897 | |
| | 121 | | FNMA, Pool# 555013 | | 5.50 | % | | 11/01/2017 | | | 124 | |
| | 756 | | FNMA, Pool# 725544 | | 5.50 | % | | 12/01/2017 | | | 771 | |
| | 9,115 | | FNMA, Pool# 763020 | | 3.50 | % | | 08/01/2018 | | | 9,553 | |
| | 35,056 | | FNMA, Pool# 744697 | | 4.50 | % | | 10/01/2018 | | | 36,251 | |
| | 9,254 | | FNMA, Pool# 725185 | | 5.00 | % | | 02/01/2019 | | | 9,659 | |
| | 41,004 | | FNMA, Pool# 803941 # | | 2.69 | % | | 11/01/2019 | | | 41,623 | |
| | 10,109 | | FNMA, Pool# 255626 | | 5.00 | % | | 03/01/2020 | | | 10,744 | |
| | 60,189 | | FNMA, Pool# 970382 | | 4.50 | % | | 03/01/2023 | | | 63,276 | |
| | 801 | | FNMA, Pool# 303585 | | 7.00 | % | | 10/01/2025 | | | 898 | |
| | 1,065 | | FNMA, Pool# 303713 | | 6.50 | % | | 02/01/2026 | | | 1,219 | |
| | 12,756 | | FNMA, Pool# 539082 | | 7.00 | % | | 08/01/2028 | | | 12,908 | |
| | 1,443,471 | | FNMA, Pool# AS5354 | | 3.50 | % | | 01/01/2030 | | | 1,512,848 | |
| | 1,723,860 | | FNMA, Pool# AY9794 | | 3.50 | % | | 07/01/2030 | | | 1,812,160 | |
| | 1,235,137 | | FNMA, Pool# AZ4807 | | 3.50 | % | | 07/01/2030 | | | 1,295,675 | |
| | 1,376,193 | | FNMA, Pool# AY2366 | | 3.50 | % | | 07/01/2030 | | | 1,443,502 | |
| | 1,685,048 | | FNMA, Pool# AZ9399 | | 3.50 | % | | 09/01/2030 | | | 1,767,420 | |
| | 1,071,706 | | FNMA, Pool# AZ3260 | | 3.50 | % | | 09/01/2030 | | | 1,125,825 | |
| | 1,466,881 | | FNMA, Pool# BA2725 | | 3.50 | % | | 10/01/2030 | | | 1,540,575 | |
| | 1,576,691 | | FNMA, Pool# AZ8668 | | 3.50 | % | | 11/01/2030 | | | 1,654,478 | |
| | 1,859,792 | | FNMA, Pool# BA4230 | | 3.50 | % | | 11/01/2030 | | | 1,953,988 | |
| | 1,030,662 | | FNMA, Pool# BC1118 | | 3.50 | % | | 12/01/2030 | | | 1,083,408 | |
| | 1,510,114 | | FNMA, Pool# BA6294 | | 3.50 | % | | 12/01/2030 | | | 1,586,602 | |
| | 2,780 | | FNMA, Pool# 592751 | | 7.00 | % | | 06/01/2031 | | | 2,928 | |
| | 25,004 | | FNMA, Pool# 625536 | | 6.00 | % | | 01/01/2032 | | | 28,238 | |
| | 38,563 | | FNMA, Pool# 628837 | | 6.50 | % | | 03/01/2032 | | | 44,107 | |
| | 737 | | FNMA, Pool# 555531 | | 5.50 | % | | 06/01/2033 | | | 829 | |
| | 884 | | FNMA, Pool# 555591 | | 5.50 | % | | 07/01/2033 | | | 995 | |
| | 45,170 | | FNMA, Pool# 748643 # | | 2.03 | % | | 09/01/2033 | | | 47,145 | |
| | 952 | | FNMA, Pool# 555876 | | 5.50 | % | | 10/01/2033 | | | 1,078 | |
| | 58,364 | | FNMA, Pool# 744805 # | | 2.02 | % | | 11/01/2033 | | | 59,499 | |
| | 61,124 | | FNMA, Pool# 741373 # | | 2.66 | % | | 12/01/2033 | | | 64,026 | |
| | 84,442 | | FNMA, Pool# 764342 # | | 2.02 | % | | 02/01/2034 | | | 87,409 | |
| | 2,876 | | FNMA, Pool# 725424 | | 5.50 | % | | 04/01/2034 | | | 3,236 | |
| | 135,343 | | FNMA, Pool# 780488 # | | 1.89 | % | | 07/01/2034 | | | 139,158 | |
| | 34,790 | | FNMA, Pool# 796283 | | 5.50 | % | | 12/01/2034 | | | 39,212 | |
| | 1,293 | | FNMA, Pool# 735022 | | 5.50 | % | | 12/01/2034 | | | 1,460 | |
| | 11,197 | | FNMA, Pool# 735263 # | | 2.27 | % | | 01/01/2035 | | | 11,726 | |
| | 3,398 | | FNMA, Pool# 821252 # | | 2.12 | % | | 05/01/2035 | | | 3,588 | |
| | 1,061 | | FNMA, Pool# 255706 | | 5.50 | % | | 05/01/2035 | | | 1,197 | |
| | 77 | | FNMA, Pool# 735580 | | 5.00 | % | | 06/01/2035 | | | 86 | |
| | 166,677 | | FNMA, Pool# 836335 # | | 2.30 | % | | 10/01/2035 | | | 167,070 | |
| | 124,592 | | FNMA, Pool# 836715 # | | 2.61 | % | | 10/01/2035 | | | 125,150 | |
| | 8,592 | | FNMA, Pool# 851372 # | | 2.51 | % | | 12/01/2035 | | | 9,099 | |
| | 114 | | FNMA, Pool# 849496 | | 5.50 | % | | 12/01/2035 | | | 127 | |
| | 1,466 | | FNMA, Pool# 256022 | | 5.50 | % | | 12/01/2035 | | | 1,644 | |
| | 24,904 | | FNMA, Pool# 848817 | | 5.00 | % | | 01/01/2036 | | | 27,404 | |
| | 1,016 | | FNMA, Pool# 845341 | | 5.50 | % | | 01/01/2036 | | | 1,141 | |
| | 1,730 | | FNMA, Pool# 256059 | | 5.50 | % | | 01/01/2036 | | | 1,938 | |
| | 2,795 | | FNMA, Pool# 880371 # | | 2.55 | % | | 02/01/2036 | | | 2,957 | |
| | 70,630 | | FNMA, Pool# 865849 # | | 2.11 | % | | 03/01/2036 | | | 75,052 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Mortgage Backed Securities — (Continued) | | | | | | | | |
| | 4,853 | | FNMA, Pool# 891332 # | | 2.13 | % | | 04/01/2036 | | | 5,105 | |
| | 3,753 | | FNMA, Pool# 745480 # | | 5.03 | % | | 04/01/2036 | | | 3,967 | |
| | 104,391 | | FNMA, Pool# 882017 # | | 2.06 | % | | 05/01/2036 | | | 109,506 | |
| | 3,156 | | FNMA, Pool# 901006 # | | 2.38 | % | | 09/01/2036 | | | 3,353 | |
| | 10,347 | | FNMA, Pool# 902188 # | | 2.66 | % | | 11/01/2036 | | | 11,026 | |
| | 220 | | FNMA, Pool# 905690 | | 5.50 | % | | 12/01/2036 | | | 246 | |
| | 90,089 | | FNMA, Pool# 888445 # | | 2.18 | % | | 04/01/2037 | | | 96,992 | |
| | 11,121 | | FNMA, Pool# 888463 # | | 5.21 | % | | 05/01/2037 | | | 11,591 | |
| | 420 | | FNMA, Pool# 960392 | | 5.50 | % | | 12/01/2037 | | | 470 | |
| | 6,733 | | FNMA, Pool# 933628 # | | 2.38 | % | | 07/01/2038 | | | 7,121 | |
| | 4,495 | | FNMA, Pool# 965185 # | | 1.98 | % | | 09/01/2038 | | | 4,724 | |
| | 5,662,887 | | FNMA, Pool# AS2249 | | 4.00 | % | | 04/01/2039 | | | 6,010,676 | |
| | 18,095 | | FNMA, Pool# AC4824 # | | 2.55 | % | | 10/01/2039 | | | 19,197 | |
| | 10,571 | | FNMA, Pool# AH4794 | | 5.00 | % | | 02/01/2041 | | | 11,701 | |
| | 27,029 | | FNMA, Pool# AI1170 | | 5.00 | % | | 04/01/2041 | | | 29,861 | |
| | 4,602,975 | | FNMA, Pool# AL6768 | | 6.00 | % | | 05/01/2041 | | | 5,215,087 | |
| | 658,139 | | FNMA, Pool# MA1065 | | 4.00 | % | | 05/01/2042 | | | 698,533 | |
| | 910,773 | | FNMA, Pool# AO7724 | | 4.50 | % | | 06/01/2042 | | | 984,214 | |
| | 15,914 | | FNMA, Pool# AR1150 | | 3.00 | % | | 01/01/2043 | | | 15,962 | |
| | 2,818,245 | | FNMA, Pool# AU6230 | | 5.00 | % | | 09/01/2043 | | | 3,108,369 | |
| | 1,196,421 | | FNMA, Pool# AV6078 | | 4.00 | % | | 11/01/2043 | | | 1,271,390 | |
| | 1,092,002 | | FNMA, Pool# AS1429 | | 4.00 | % | | 12/01/2043 | | | 1,160,425 | |
| | 1,394,097 | | FNMA, Pool# AV7739 | | 4.00 | % | | 01/01/2044 | | | 1,481,913 | |
| | 1,711,697 | | FNMA, Pool# AS2985 | | 4.00 | % | | 08/01/2044 | | | 1,820,041 | |
| | 2,293,903 | | FNMA, Pool# AX8509 | | 4.00 | % | | 11/01/2044 | | | 2,433,463 | |
| | 1,137,531 | | FNMA, Pool# AY0382 | | 4.00 | % | | 11/01/2044 | | | 1,204,426 | |
| | 1,555,080 | | FNMA, Pool# AX3968 | | 4.50 | % | | 01/01/2045 | | | 1,687,604 | |
| | 4,139,241 | | FNMA, Pool# AY0674 | | 3.50 | % | | 02/01/2045 | | | 4,280,193 | |
| | 246,593 | | FNMA, Pool# AY1007 | | 4.00 | % | | 02/01/2045 | | | 261,222 | |
| | 1,470,336 | | FNMA, Pool# AY4463 | | 4.00 | % | | 02/01/2045 | | | 1,557,521 | |
| | 428,424 | | FNMA, Pool# AY3851 | | 4.50 | % | | 02/01/2045 | | | 462,911 | |
| | 1,660,275 | | FNMA, Pool# AY0677 | | 3.50 | % | | 03/01/2045 | | | 1,719,387 | |
| | 1,069,624 | | FNMA, Pool# AW9534 | | 4.00 | % | | 03/01/2045 | | | 1,135,689 | |
| | 3,134,942 | | FNMA, Pool# AY6275 | | 4.00 | % | | 03/01/2045 | | | 3,320,841 | |
| | 1,222,702 | | FNMA, Pool# AY3854 | | 4.50 | % | | 04/01/2045 | | | 1,322,947 | |
| | 1,190,543 | | FNMA, Pool# AY8675 | | 4.50 | % | | 04/01/2045 | | | 1,291,999 | |
| | 1,867,376 | | FNMA, Pool# AZ2000 | | 3.50 | % | | 05/01/2045 | | | 1,933,134 | |
| | 3,323,008 | | FNMA, Pool# AZ2001 | | 3.50 | % | | 05/01/2045 | | | 3,436,164 | |
| | 1,996,663 | | FNMA, Pool# AY9118 | | 4.00 | % | | 05/01/2045 | | | 2,118,151 | |
| | 1,894,846 | | FNMA, Pool# AY9108 | | 4.00 | % | | 05/01/2045 | | | 2,010,134 | |
| | 3,336,030 | | FNMA, Pool# AZ2719 | | 4.00 | % | | 06/01/2045 | | | 3,542,083 | |
| | 2,135,865 | | FNMA, Pool# AZ1915 | | 4.00 | % | | 06/01/2045 | | | 2,267,787 | |
| | 3,099,414 | | FNMA, Pool# AY8830 | | 4.00 | % | | 06/01/2045 | | | 3,297,558 | |
| | 1,465,544 | | FNMA, Pool# AZ3277 | | 4.00 | % | | 06/01/2045 | | | 1,554,716 | |
| | 994,016 | | FNMA, Pool# AZ4154 | | 4.00 | % | | 06/01/2045 | | | 1,056,949 | |
| | 992,774 | | FNMA, Pool# AZ5811 | | 4.00 | % | | 07/01/2045 | | | 1,053,177 | |
| | 1,409,861 | | FNMA, Pool# AZ6495 | | 4.00 | % | | 07/01/2045 | | | 1,493,574 | |
| | 1,234,336 | | FNMA, Pool# AY3869 | | 4.00 | % | | 07/01/2045 | | | 1,313,256 | |
| | 2,402,053 | | FNMA, Pool# AY3870 | | 4.00 | % | | 07/01/2045 | | | 2,555,618 | |
| | 3,707,045 | | FNMA, Pool# AY3871 | | 4.50 | % | | 07/01/2045 | | | 4,017,233 | |
| | 671,853 | | FNMA, Pool# AZ4200 | | 4.50 | % | | 07/01/2045 | | | 725,999 | |
| | 1,665,912 | | FNMA, Pool# AY8184 | | 4.00 | % | | 08/01/2045 | | | 1,768,816 | |
| | 2,586,142 | | FNMA, Pool# AZ8218 | | 4.00 | % | | 08/01/2045 | | | 2,739,623 | |
| | 3,636,326 | | FNMA, Pool# AZ7828 | | 4.00 | % | | 08/01/2045 | | | 3,857,561 | |
| | 697,389 | | FNMA, Pool# AZ8061 | | 4.00 | % | | 08/01/2045 | | | 739,608 | |
| | 1,802,618 | | FNMA, Pool# AZ5362 | | 4.00 | % | | 08/01/2045 | | | 1,912,291 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par Value | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Mortgage Backed Securities — (Continued) | | | | | | | | |
| | 3,975,098 | | FNMA, Pool# AY3873 | | 4.00 | % | | 08/01/2045 | | | 4,229,260 | |
| | 2,560,097 | | FNMA, Pool# AY8481 | | 4.50 | % | | 08/01/2045 | | | 2,772,047 | |
| | 2,673,364 | | FNMA, Pool# AZ7182 | | 4.50 | % | | 08/01/2045 | | | 2,901,163 | |
| | 1,175,623 | | FNMA, Pool# AY3877 | | 4.00 | % | | 09/01/2045 | | | 1,250,785 | |
| | 1,759,628 | | FNMA, Pool# AZ7073 | | 4.00 | % | | 09/01/2045 | | | 1,872,136 | |
| | 497,895 | | FNMA, Pool# AZ1494 | | 4.00 | % | | 09/01/2045 | | | 529,418 | |
| | 3,030,608 | | FNMA, Pool# AY3876 | | 4.00 | % | | 09/01/2045 | | | 3,224,381 | |
| | 6,429,274 | | FNMA, Pool# AY3875 | | 4.50 | % | | 09/01/2045 | | | 6,967,247 | |
| | 1,614,156 | | FNMA, Pool# AZ9834 | | 4.50 | % | | 09/01/2045 | | | 1,749,220 | |
| | 5,523,267 | | FNMA, Pool# AY3878 | | 4.50 | % | | 09/01/2045 | | | 5,985,433 | |
| | 1,436,707 | | FNMA, Pool# BA2526 | | 4.00 | % | | 10/01/2045 | | | 1,525,454 | |
| | 1,863,581 | | FNMA, Pool# AY3881 | | 4.00 | % | | 10/01/2045 | | | 1,982,726 | |
| | 318,075 | | FNMA, Pool# BA2936 | | 4.00 | % | | 10/01/2045 | | | 337,330 | |
| | 1,950,446 | | FNMA, Pool# BA6225 | | 4.00 | % | | 10/01/2045 | | | 2,075,137 | |
| | 1,422,162 | | FNMA, Pool# AZ9543 | | 4.50 | % | | 10/01/2045 | | | 1,541,160 | |
| | 1,149,589 | | FNMA, Pool# BA2509 | | 4.50 | % | | 10/01/2045 | | | 1,245,781 | |
| | 1,451,437 | | FNMA, Pool# AY3887 | | 3.50 | % | | 11/01/2045 | | | 1,499,959 | |
| | 2,225,296 | | FNMA, Pool# BA5436 | | 3.50 | % | | 11/01/2045 | | | 2,301,193 | |
| | 1,236,375 | | FNMA, Pool# AY3884 | | 4.00 | % | | 11/01/2045 | | | 1,315,426 | |
| | 3,773,281 | | FNMA, Pool# AY3885 | | 4.00 | % | | 11/01/2045 | | | 4,014,522 | |
| | 5,405,550 | | FNMA, Pool# AY3886 | | 4.50 | % | | 11/01/2045 | | | 5,857,867 | |
| | 6,621,759 | | FNMA, Pool# AY3882 | | 4.50 | % | | 11/01/2045 | | | 7,175,840 | |
| | 565,083 | | FNMA, Pool# BA5579 | | 3.50 | % | | 12/01/2045 | | | 583,625 | |
| | 4,777,719 | | FNMA, Pool# AY3883 | | 3.50 | % | | 12/01/2045 | | | 4,936,351 | |
| | 2,146,412 | | FNMA, Pool# BA4395 | | 4.00 | % | | 12/01/2045 | | | 2,274,367 | |
| | 1,020,721 | | FNMA, Pool# BA6309 | | 4.50 | % | | 12/01/2045 | | | 1,110,157 | |
| | 246,157 | | FNMA REMIC Trust, Series 2003-122 | | 4.00 | % | | 12/25/2018 | | | 253,431 | |
| | 82 | | FNMA REMIC Trust, Series 1990-105 | | 6.50 | % | | 09/25/2020 | | | 87 | |
| | 11,353 | | FNMA REMIC Trust, Series 2012-1 | | 1.75 | % | | 12/25/2021 | | | 11,422 | |
| | 649,638 | | FNMA REMIC Trust, Series 2011-18 | | 4.00 | % | | 10/25/2025 | | | 656,572 | |
| | 4,812,154 | | FNMA REMIC Trust, Series 2012-139~ | | 2.50 | % | | 12/25/2027 | | | 468,048 | |
| | 321,785 | | FNMA REMIC Trust, Series 2013-15~ | | 3.00 | % | | 03/25/2028 | | | 35,690 | |
| | 7,633,287 | | FNMA REMIC Trust, Series 2015-36~ | | 3.50 | % | | 06/25/2030 | | | 1,081,458 | |
| | 4,365,244 | | FNMA REMIC Trust, Series 2013-115~ | | 3.00 | % | | 04/25/2031 | | | 610,348 | |
| | 14,504,562 | | FNMA REMIC Trust, Series 2014-14~ | | 3.00 | % | | 04/25/2031 | | | 1,586,637 | |
| | 11,185,134 | | FNMA REMIC Trust, Series 2013-104~ | | 3.00 | % | | 08/25/2032 | | | 1,137,093 | |
| | 13,052,412 | | FNMA REMIC Trust, Series 2013-45~ | | 3.00 | % | | 05/25/2033 | | | 2,333,715 | |
| | 11,150,850 | | FNMA REMIC Trust, Series 2013-24~ | | 3.00 | % | | 11/25/2040 | | | 1,565,975 | |
| | 548,635 | | FNMA REMIC Trust, Series 2012-10 # | | 0.97 | % | | 02/25/2042 | | | 553,045 | |
| | 2,132,434 | | FNMA REMIC Trust, Series 2013-34~ | | 3.00 | % | | 05/25/2042 | | | 317,561 | |
| | 14,770,938 | | FNMA REMIC Trust, Series 2012-146~ | | 3.00 | % | | 11/25/2042 | | | 1,885,741 | |
| | 9,422,509 | | FNMA REMIC Trust, Series 2013-20~ | | 3.50 | % | | 11/25/2042 | | | 1,314,088 | |
| | 17,577 | | FNMA REMIC Trust, Series 2003-W10 | | 4.30 | % | | 06/25/2043 | | | 18,536 | |
| | 6,018 | | FNMA REMIC Trust, Series 2003-W12 | | 4.48 | % | | 06/25/2043 | | | 6,381 | |
| | 36,106 | | FNMA REMIC Trust, Series 2003-W12 | | 4.55 | % | | 06/25/2043 | | | 38,910 | |
| | 19,739 | | FNMA REMIC Trust, Series 2003-W12 | | 4.68 | % | | 06/25/2043 | | | 21,056 | |
| | 23,029 | | FNMA REMIC Trust, Series 2003-W12 | | 5.00 | % | | 06/25/2043 | | | 24,657 | |
| | 1,605,001 | | FNMA REMIC Trust, Series 2015-40~ | | 4.50 | % | | 03/25/2045 | | | 383,602 | |
| | 7,500,000 | | FNMA, 2.5%, Due TBA January | | 2.50 | % | | 01/15/2031 | | | 7,559,874 | |
| | 3,500,000 | | FNMA, 3.0%, Due TBA January | | 3.00 | % | | 01/15/2031 | | | 3,605,774 | |
| | 8,000,000 | | FNMA, 3.0%, Due TBA January | | 3.00 | % | | 01/15/2046 | | | 8,000,698 | |
| | 15,500,000 | | FNMA, 3.5%, Due TBA January | | 3.50 | % | | 01/15/2046 | | | 15,992,921 | |
| | 3,500,000 | | FNMA, 4.0%, Due TBA January | | 4.00 | % | | 01/15/2046 | | | 3,703,875 | |
| | 13 | | GNMA, Pool# 180963X | | 9.50 | % | | 11/15/2016 | | | 13 | |
| | 313 | | GNMA, Pool# 781403X | | 6.00 | % | | 02/15/2017 | | | 318 | |
| | 63 | | GNMA, Pool# 198708X | | 9.50 | % | | 04/15/2017 | | | 63 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Par | | | | | | | | | | |
| Value/Shares | | Security Description | | Rate | | Maturity | | Value $ | |
| | | | | | | | | |
| Mortgage Backed Securities — (Continued) | | | | | | | | |
| | 13,916 | | GNMA, Pool# 595167X | | 5.50 | % | | 11/15/2017 | | | 14,220 | |
| | 7,369 | | GNMA, Pool# 552929X | | 5.00 | % | | 12/15/2017 | | | 7,564 | |
| | 1,670 | | GNMA, Pool# 607669X | | 5.00 | % | | 02/15/2018 | | | 1,726 | |
| | 5,460 | | GNMA, Pool# 594102X | | 4.50 | % | | 09/15/2018 | | | 5,611 | |
| | 10,029 | | GNMA, Pool# 780576X | | 7.00 | % | | 12/15/2022 | | | 11,306 | |
| | 42,311 | | GNMA, Pool# 723460X | | 4.00 | % | | 12/15/2024 | | | 44,975 | |
| | 1,535 | | GNMA, Pool# 780195X | | 8.00 | % | | 07/15/2025 | | | 1,775 | |
| | 15,387 | | GNMA, Pool# 487110 | | 6.50 | % | | 04/15/2029 | | | 18,022 | |
| | 348 | | GNMA, Pool# 536231X | | 9.00 | % | | 07/15/2030 | | | 350 | |
| | 5,234 | | GNMA, Pool# 571166 | | 7.00 | % | | 08/15/2031 | | | 5,400 | |
| | 5,064 | | GNMA, Pool# 004017M | | 6.00 | % | | 08/20/2037 | | | 5,738 | |
| | 3,603 | | GNMA, Pool# 565240X | | 6.50 | % | | 09/15/2037 | | | 4,140 | |
| | 4,017 | | GNMA, Pool# 676322X | | 7.00 | % | | 09/15/2037 | | | 4,363 | |
| | 12,330 | | GNMA, Pool# 646058X | | 6.00 | % | | 11/15/2037 | | | 13,946 | |
| | 13,819 | | GNMA REMIC Trust, Series 201-03 | | 3.00 | % | | 01/16/2027 | | | 14,294 | |
| | 16,838,548 | | GNMA REMIC Trust, Series 2013-170~ | | 2.50 | % | | 05/16/2028 | | | 1,508,370 | |
| | 1,445,594 | | GNMA REMIC Trust, Series 2013-168~ | | 2.50 | % | | 11/16/2028 | | | 136,135 | |
| | 1,181 | | GNMA REMIC Trust, Series 2003-97 | | 4.50 | % | | 03/20/2033 | | | 1,231 | |
| | 682,000 | | GNMA REMIC Trust, Series 2011-156 | | 2.00 | % | | 04/20/2040 | | | 560,795 | |
| | 11,777,386 | | GNMA REMIC Trust, Series 2013-79~ | | 3.00 | % | | 01/20/2042 | | | 1,602,474 | |
| | 831,612 | | GNMA REMIC Trust, Series 2012-97 | | 2.00 | % | | 08/16/2042 | | | 705,626 | |
| | 698,154 | | GNMA REMIC Trust, Series 2011-121 # | | 0.74 | % | | 03/16/2043 | | | 692,912 | |
| | 725,000 | | GNMA REMIC Trust, Series 2012-44 | | 2.95 | % | | 08/16/2043 | | | 727,325 | |
| | 9,500,000 | | GNMA REMIC Trust, Series 2014-104 | | 3.50 | % | | 07/16/2044 | | | 9,655,106 | |
| | 6,867,000 | | GNMA REMIC Trust, Series 2013-85 # | | 2.79 | % | | 02/16/2049 | | | 6,344,804 | |
| | 8,000,000 | | GNMA REMIC Trust, Series 2013-73 # | | 2.67 | % | | 10/16/2052 | | | 7,453,053 | |
| Total Mortgage Backed Securities (Cost $334,069,262) | | | | | | | | 332,239,861 | |
| | | | | | | | | | |
| Asset Backed Securities — 9.1% | | | | | | | | | |
| | 1,500,000 | | AmeriCredit Automobile Receivables, Series 2015-3 | | 2.73 | % | | 03/08/2021 | | | 1,490,778 | |
| | 1,750,000 | | AmeriCredit Automobile Receivables, Series 2015-4 | | 2.11 | % | | 01/08/2021 | | | 1,740,797 | |
| | 3,320,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN1 # | | 2.42 | % | | 02/26/2024 | | | 3,311,339 | |
| | 6,500,000 | | Freddie Mac STACR Debt Notes, Series 2014-DN2 # | | 1.87 | % | | 04/25/2024 | | | 6,392,561 | |
| | 3,600,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA1 # | | 2.27 | % | | 10/25/2027 | | | 3,553,546 | |
| | 5,600,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA2 # | | 2.82 | % | | 12/27/2027 | | | 5,573,748 | |
| | 5,750,000 | | Freddie Mac STACR Debt Notes, Series 2015-DNA3 # | | 3.27 | % | | 04/25/2028 | | | 5,743,642 | |
| | 2,200,000 | | Santander Drive Automobile Receivables Trust, Series 2015-4 | | 2.26 | % | | 06/15/2020 | | | 2,200,489 | |
| | 413,111 | | SLM Student Loan Trust 2007-1, Series 2007-1 # | | 0.38 | % | | 01/25/2022 | | | 411,858 | |
| Total Asset Backed Securities (Cost $30,588,462) | | | | | | | | 30,418,758 | |
| | | | | | | | | | |
| Local Government Housing Agency Bonds — 0.8% | | | | | | | | | |
| | 1,910,000 | | Delaware State Housing Authority | | 2.75 | % | | 12/01/2041 | | | 1,906,371 | |
| | 900,000 | | Missouri Housing Development Commission | | 2.65 | % | | 11/01/2040 | | | 887,526 | |
| Total Local Government Housing Agency Bonds (Cost $2,643,217) | | | | | | | | 2,793,897 | |
| | | | | | | | | | |
| Short-Term Investments — 8.0% | | | | | | | | | |
| | | | | | | | | | |
| Money Market Funds — 8.0% | | | | | | | | | |
| | 26,954,466 | | DWS Cash Account Trust — Government & Agency Securities Portfolio — Institutional Shares, 0.04%* | | | | | | | | 26,954,466 | |
| Total Short-Term Investments (Cost $26,954,466) | | | | | | | | 26,954,466 | |
| Total Investments — 116.6% (Cost $394,255,407) | | | | | | | | 392,406,982 | |
| Liabilities in Excess of Other Assets — (16.6)% | | | | | | | | (55,766,531 | ) |
| NET ASSETS — 100.0% | | | | | | | $ | 336,640,451 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2015 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
| Mortgage Backed Securities | 98.7% |
| Asset Backed Securities | 9.1% |
| Money Market Funds | 8.0% |
| Local Government Housing Agency Bonds | 0.8% |
| Other Assets and Liabilities | (16.6)% |
| | 100.0% |
| # | Variable rate security. Rate disclosed is as of December 31, 2015. |
| ~ | Interest Only Security |
| * | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory – WMC Strategic European Equity Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory — WMC Strategic European Equity Fund Institutional Shares (the “Fund”) declined by 0.13%. During the same period, the MSCI Europe Index (the “Index”), the Fund’s benchmark, declined by 6.42%. The Fund outperformed the Index by 629 basis points.
We take a bottom up approach to building the portfolio where we aim to identify companies that we believe benefit from a structural growth advantage, are competitively well-positioned and attractively valued. This fundamental process leads us to hold certain sector over- and under-weights.
The Fund outperformed the Index due to strong stock selection. Selection within the industrials, health care, and consumer discretionary sectors contributed most to relative performance. Information technology was the only sector where stock selection was negative. Sector allocation, a fall-out of the bottom-up stock selection process, also was a strong contributor to relative results. The Fund’s underweight to materials and lack of exposure to energy, as well as an overweight to the consumer staples sector, contributed most to relative performance. Lack of exposure to the utilities and telecommunication services sectors partially offset positive relative returns as those sectors fell less than the broader index.
Top contributors to relative returns during the period included DSV, H. Lundbeck, and Heineken. DSV is a Denmark-based freight and logistics company. We believe the company has both a profitable position within European freight and contract logistics as well as exposure to sea and air freight. Across all of its divisions, we believe it benefits from an asset light business and, given its position as a freight broker of considerable size, it is able to benefit from pricing economies of scale. Thanks to a very strong management team, the company has a strong focus on shareholder returns. During the period, the company reported consensus-beating results and raised its full-year guidance, due to a combination of better than expected volume performance and a positive currency translation impact. H. Lundbeck is a Denmark-based pharmaceutical company focused on central nervous system diseases. We believe the company has a very strong suite of products and this, in conjunction with the recent management change, prompts us to retain a positive outlook. Encouraging signs of the restructuring plans, which were announced during the third quarter, are already in evidence along with strong product momentum. Heineken, a Netherlands-based global brewing company, reported better-than-expected quarterly results during the period, driven by better volume growth in Asia and the Americas. Over the longer term, we believe Heineken is well-placed to benefit from growth in emerging markets.
Top detractors from relative returns included our positions in Spectris and Julius Baer Group, as well as not owning benchmark constituent Nestle. Spectris is a U.K.-based industrials business specializing in electronic control and process instrumentation sectors. We believe it is a very high quality company that has consistently delivered strong margins and returns. In the current low-growth environment, we believe the stock has been punished although we would note that in specific divisions, the company is beginning to reap the rewards of its earlier organic investments. We still believe the company is well-managed and attractively valued and continue to hold. Julius Baer is a Switzerland-based private wealth management operator. We believe the bank is one of the most well-established franchises relative to its peers. The stock was battered by concerns about a potential slowdown in the Asia-Pacific region. However, flows seem to be holding up well and we continue to favor the bank’s very strong brand cachet and depth of knowledge within the private banking segment. Not holding shares of Nestle detracted from returns as the stock eked out a positive return during the period. We continue to avoid this name as we believe there are competitive pressures across a number of their business categories, including confectionary, pet food and coffee. Additionally, Nestlé’s exposure to China has grown.
We reviewed our holdings during the period and initiated new positions in OVS, Ultra Electronic Holdings, and Worldpay. OVS is an Italy-based fashion retailer. We like the company due to its focus solely on the domestic Italian market where we believe the company is able to benefit from growing economies of scale. We view the market as currently very fragmented and the company has been successfully increasing its market share at the expense of competitors. We also favor its strong management team that has a sound execution track record. In our view, the stock is very attractively valued. Ultra Electronic Holdings is a U.K.-based company that designs and manufactures products for defense, security and aerospace applications, emphasizing integrated information technology solutions. The company operates with a streamlined management structure that overlooks a number of autonomous businesses. Many of its end markets are highly niche in nature, which we believe is a key competitive advantage and barriers to entry are high given the sophisticated and sensitive nature of the products that the company manufactures. Worldpay is a UK-based merchant acquiring business with exposure to the U.K., U.S. and e-commerce. We believe the company has strong organic topline growth due to non-cash payment and online retail/e-commerce growth. In addition, it has invested significantly in a new processing platform/acquiring engine which we believe should help margins and capex.
Brown Advisory – WMC Strategic European Equity Fund
A Message to Our Shareholders
December 31, 2015
We eliminated Sanofi, Anheuser-Busch InBev and Edenred during the period. We sold Sanofi, a France-based diversified pharmaceutical company, as we felt the opportunity was less attractive given concerns over increased competition and pricing pressure on their diabetes franchise, which was greater than we had expected. Anheuser-Busch InBev, a Belgium-based multi-national beverage company and the largest brewer in the world, was sold as a result of our lower level of conviction in the underlying fundamentals. Edenred, is a France-based company engaged in the food and restaurant voucher business. We believe the company has a sound business model with good medium-term prospects. However, near term headwinds prompted us to eliminate the company from the portfolio.
The low-growth environment continues, which we expect to prove challenging for many companies, especially given earlier expectations for a broad-based earnings recovery in Europe, which carried the stock market higher in 2015 regardless of companies’ individual prospects. With increased volatility and the continuing search for growth, select European quality companies are trading at higher-than-expected valuation premiums. If growth and interest rates remain low, the premiums may persist, helping these stocks to keep outperforming the market, driven by multiple expansion. However, we are monitoring this trade-off between valuation and quality and will adjust the portfolio accordingly if valuations no longer support our structural growth expectations for individual companies.
The market is still reacting quite drastically to earnings surprises: stocks that disappoint are being hit hard, while companies that deliver on expectations are being rewarded. We seek companies whose earnings and cash flow are above the market average, and we are encouraged that the portfolio’s relative valuation premium versus the broad market remains at historically low levels. At the sector level, we are following events in the oil markets. Valuations in oil-related sectors have declined, but we are struggling to find new opportunities that fit into our investment approach. As always, we continue to seek attractively valued companies with long term growth advantages and strong competitive positions.
During the period, the Fund utilized currency forwards and equity futures. The currency forwards were used to hedge risk associated with currency movements. The equity futures were used to effectively gain exposure to the European market and to manage cash flows.
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.
Brown Advisory – WMC Strategic European Equity Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 97.8% | | | |
| | | | |
| Belgium — 1.8% | | | |
| | 220,530 | | UCB S.A. | | | 19,905,825 | |
| | | | | |
| Denmark — 4.9% | | | | |
| | 876,733 | | DSV A/S | | | 34,511,428 | |
| | 404,820 | | H. Lundbeck A/S* | | | 13,822,697 | |
| | 107,326 | | Royal Unibrew A/S | | | 4,361,900 | |
| | 310,544 | | Spar Nord Bank A/S | | | 2,743,874 | |
| | | | | | | 55,439,899 | |
| Finland — 4.7% | | | | |
| | 838,244 | | Kone OYJ | | | 35,492,332 | |
| | 346,160 | | Sampo OYJ | | | 17,578,876 | |
| | | | | | | 53,071,208 | |
| France — 8.3% | | | | |
| | 67,768 | | BioMerieux S.A. | | | 8,086,465 | |
| | 139,118 | | Elior S.A. | | | 2,914,624 | |
| | 564,432 | | Legrand S.A. | | | 31,927,421 | |
| | 132,224 | | L’Oreal S.A. | | | 22,240,837 | |
| | 251,930 | | Pernod Ricard S.A. | | | 28,731,368 | |
| | | | | | | 93,900,715 | |
| Germany — 9.1% | | | | |
| | 229,778 | | Bayer AG | | | 28,697,216 | |
| | 121,757 | | Beiersdorf AG | | | 11,066,720 | |
| | 1,455,102 | | Infineon Technologies AG | | | 21,213,628 | |
| | 114,549 | | NORMA Group SE | | | 6,331,328 | |
| | 355,308 | | ProSiebenSat.1 Media AG | | | 17,925,852 | |
| | 303,696 | | United Internet AG | | | 16,697,033 | |
| | | | | | | 101,931,777 | |
| Italy — 3.8% | | | | |
| | 344,132 | | Banca Generali S.p.A. | | | 10,825,077 | |
| | 206,923 | | DiaSorin S.p.A. | | | 10,867,982 | |
| | 1,385,145 | | OVS S.p.A.* | | | 9,635,529 | |
| | 491,503 | | Salvatore Ferragam S.p.A. | | | 11,519,971 | |
| | | | | | | 42,848,559 | |
| Netherlands — 3.8% | | | | |
| | 130,486 | | ASML Holding NV | | | 11,593,939 | |
| | 371,442 | | Heineken NV | | | 31,653,325 | |
| | | | | | | 43,247,264 | |
| Spain — 0.5% | | | | |
| | 97,016 | | Viscofan S.A. | | | 5,852,288 | |
| | | | | |
| Sweden — 10.4% | | | | |
| | 1,415,131 | | Assa Abloy AB | | | 29,622,522 | |
| | 1,525,674 | | Atlas Copco AB | | | 37,416,857 | |
| | 1,066,373 | | Cloetta AB* | | | 3,523,111 | |
| | 2,335,855 | | Nordea Bank AB | | | 25,628,439 | |
| | 1,075,585 | | Trelleborg AB | | | 20,874,751 | |
| | | | | | | 117,065,680 | |
| Switzerland — 19.5% | | | | |
| | 2,597 | | BELIMO Holding AG | | | 6,352,486 | |
| | 941 | | Chocoladefabriken Lindt & Spruengli AG | | | 5,876,270 | |
| | 454,857 | | Cie Financiere Richemont S.A. | | | 32,555,453 | |
| | 30,690 | | Daetwyler Holding AG | | | 4,384,534 | |
| | 77,321 | | Geberit AG | | | 26,188,836 | |
| | 3,608 | | Givaudan S.A. | | | 6,548,383 | |
| | 15,497 | | INFICON Holding AG | | | 4,940,778 | |
| | 713,293 | | Julius Baer Gruppe AG | | | 34,507,092 | |
| | 128,939 | | Kuehne & Nagel International AG | | | 17,664,539 | |
| | 4,485 | | LEM Holding S.A. | | | 3,380,766 | |
| | 57,968 | | Roche Holding, Ltd. | | | 16,063,421 | |
| | 90,462 | | Schindler Holding Ltd. | | | 15,134,196 | |
| | 74,427 | | Tecan Trading AG | | | 12,056,201 | |
| | 1,735,072 | | UBS Group | | | 33,659,480 | |
| | | | | | | 219,312,435 | |
| United Kingdom — 31.0% | | | | |
| | 590,613 | | Berendsen PLC | | | 9,363,029 | |
| | 8,170,767 | | Booker Group PLC | | | 21,806,864 | |
| | 892,830 | | British American Tobacco PLC | | | 49,582,743 | |
| | 1,658,505 | | Compass Group | | | 28,739,114 | |
| | 115,896 | | Diploma PLC | | | 1,294,670 | |
| | 879,167 | | Essentra PLC | | | 10,717,207 | |
| | 742,963 | | Halma PLC | | | 9,460,714 | |
| | 310,500 | | Hikma Pharmaceuticals PLC | | | 10,525,852 | |
| | 637,230 | | Jardine Lloyd Thompson Group PLC | | | 8,623,219 | |
| | 1,380,734 | | Prudential PLC | | | 31,107,416 | |
| | 401,721 | | Reckitt Benckiser Group PLC | | | 37,169,995 | |
| | 3,569,132 | | Saga PLC | | | 10,535,940 | |
| | 1,898,744 | | Smith & Nephew PLC | | | 33,839,751 | |
| | 706,880 | | Spectris PLC | | | 18,759,889 | |
| | 328,109 | | Spirax-Sarco Engineering PLC | | | 15,868,353 | |
| | 1,358,689 | | SSP Group PLC | | | 6,496,452 | |
| | 309,705 | | SuperGroup PLC | | | 7,506,266 | |
| | 324,556 | | Ultra Electronics PLC | | | 9,451,497 | |
| | 235,788 | | Victrex PLC | | | 6,250,913 | |
| | 525,942 | | WH Smith PLC | | | 13,666,118 | |
| | 1,967,178 | | Worldpay Group PLC* | | | 8,911,795 | |
| | | | | | | 349,677,797 | |
| Total Common Stocks (Cost $1,094,797,861) | | | 1,102,253,447 | |
| | | | | |
| Short-Term Investments — 1.9% | | | | |
| | | | | |
| Money Market Funds — 1.9% | | | | |
| | 21,001,530 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 21,001,530 | |
| Total Short-Term Investments (Cost $21,001,530) | | | 21,001,530 | |
| Total Investments — 99.7% (Cost $1,115,799,391) | | | 1,123,254,977 | |
| Other Assets in Excess of Liabilities — 0.3% | | | 3,327,184 | |
| NET ASSETS — 100.0% | | $ | 1,126,582,161 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory – WMC Strategic European Equity Fund
Schedule of Investments
December 31, 2015 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
| United Kingdom | 31.0% |
| Switzerland | 19.5% |
| Sweden | 10.4% |
| Germany | 9.1% |
| France | 8.3% |
| Denmark | 4.9% |
| Finland | 4.7% |
| Netherlands | 3.8% |
| Italy | 3.8% |
| Money Market Funds | 1.9% |
| Belgium | 1.8% |
| Spain | 0.5% |
| Other Assets and Liabilities | 0.3% |
| | 100.0% |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory – WMC Japan Alpha Opportunities Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015 the Brown Advisory - WMC Japan Alpha Opportunities Fund Institutional Shares (the “Fund”) decreased 6.37% in value. During the same period, the TOPIX Total Return U.S. Dollar Hedged Index (the “Index”), the Fund’s benchmark, fell 4.36%. The unhedged TOPIX Total Return Index declined 2.56% during the same period, as the Japanese yen appreciated relative to the U.S. dollar.
During the initial three months of the period, investors experienced the first equity market decline in Japan in more than a year. Renewed concerns over global growth outweighed supportive factors such as a domestic-led economic recovery—including solid non-manufacturing activities, rising inflation, and real wages—and favorable supply-demand conditions stemming from monetary easing and public pension portfolio rebalancing. Slowing growth especially in China, and uncertainty around U.S. Federal Reserve policy weighed on equities. Equities rebounded in the final three months of the period, as pessimism on global growth waned and the domestic-led macro recovery and favorable supply-demand conditions remained in force. The rebound was broad based where oversold global cyclicals (machinery, basic materials) led the rally, while richly-valued defensive industries (health care, foods) also performed well.
Across Japan, momentum and value were the best performing style factors while high leverage underperformed. The portfolio’s smaller cap bias and an overweight to liquidity were headwinds, as well as the timing of the exposure to momentum. Strong stock selection, however, largely offset any impact from factor biases.
Sector allocation, a residual of bottom-up stock selection process by the underlying managers, weighed on relative returns during the period. Our underweight to the consumer staples and telecommunication services, as well as our overweight to the materials and information technology sectors, weighed on relative performance. Stock selection contributed to relative returns particularly due to positive selection within the consumer discretionary, industrials and materials sectors. This was partially offset by negative selection within the information technology and telecommunication services sectors.
Top relative contributors included Daikyonishikawa, a manufacturer of plastic automobile parts; Adastria, a Japan-based clothing retailer; and SCSK, a high quality IT services company with exposure to most major industrial segments. Top relative detractors included Sumco, a manufacturer of high-purity silicon wafers for semi-conductors; Sanken Electric, a semi-conductor company that specializes in power integrated circuits and magnetic sensors; and T&D Holdings, one of the largest life insurance companies in Japan. Our position in Sanken Electric was eliminated during the period.
During the period, the team eliminated the portfolio’s position in Rakuten, Japan’s largest e-commerce operator. Over the short- to medium-term, we believe the company will endure maturing industry trends. The company has already seen growth slow as a market leader, but with a rise in competition from Amazon and Yahoo Japan, we believe there will be slower growth and higher investment requirements from Rakuten. We added to Softbank, a Japanese holding company of Internet, telecom and mobile companies. We increased our position as we continue to like the company and were encouraged by the share buybacks by the President and COO in August, which was received well by the market.
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 detracted from the Fund’s absolute performance during the period as the Japanese yen appreciated 2.0% relative to the U.S. dollar. The Fund’s use of equity futures also detracted from performance as the broad Japanese market declined during the period. Futures were used to gain efficient exposure to the market and to manage cash flows.
Despite the increased concerns about the outlook for global growth, we continue to believe that the Japanese economy and its equity market will still provide investors with a lot of opportunities when compared to other parts of the world. We will closely monitor the actions of the Bank of Japan, and the health of inflationary impulses in the economy, together with external effects, to determine the sustainability of this positive cycle. Beyond the effect of the economic cycle, we remain positive about the opportunities in Japan for alpha driven by stock-picking. Evidence continues to grow that corporate reforms are altering management behavior to the benefit of shareholders. In addition, valuation disparity between sectors, together with low levels of analyst coverage, offer attractive opportunities for bottom up stock pickers.
Brown Advisory – WMC Japan Alpha Opportunities Fund
A Message to Our Shareholders
December 31, 2015
At the end of the period, our largest overweights were to the information technology and materials sectors, while our largest underweights were to the industrials and consumer staples sectors, compared with the benchmark.
Sincerely,
Kent M. Stahl, CFA
Portfolio Manager
Gregg R. Thomas, 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. Earnings growth is not representative 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.
Brown Advisory – WMC Japan Alpha Opportunities FundSchedule of Investments
December 31, 2015 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 94.7% | | | |
| | | | |
| Japan — 94.7% | | | |
| | | | |
| Consumer Discretionary — 24.6% | | | |
| | 177,700 | | Adastria Holdings Co., Ltd. | | | 9,943,736 | |
| | 125,800 | | Aeon Delight Co., Ltd. | | | 4,036,020 | |
| | 617,600 | | Aisan Industry Co., Ltd. | | | 6,341,991 | |
| | 213,400 | | Alpine Electronics, Inc. | | | 3,316,804 | |
| | 49,162 | | Askul Corp. | | | 1,975,312 | |
| | 414,000 | | Avex Group Holdings, Inc. | | | 4,911,336 | |
| | 270,500 | | Bandai Namco Holdings, Inc. | | | 5,714,889 | |
| | 89,245 | | BELC Co, Ltd. | | | 3,259,174 | |
| | 244,300 | | Benesse Holdings, Inc. | | | 7,035,353 | |
| | 32,804 | | Chiyoda Co., Ltd. | | | 1,020,714 | |
| | 380,794 | | Cookpad, Inc. | | | 8,083,648 | |
| | 553,700 | | DaikyoNishikawa Co. | | | 10,247,585 | |
| | 269,753 | | DIP Corp. | | | 5,524,963 | |
| | 267,000 | | En-Japan, Inc. | | | 9,831,660 | |
| | 608,100 | | Exedy Corp. | | | 14,696,909 | |
| | 1,185,500 | | Funai Electric Co., Ltd. | | | 9,944,077 | |
| | 223,700 | | Gendai Agency, Inc. | | | 1,156,357 | |
| | 313,300 | | Gulliver International | | | 3,122,860 | |
| | 75,700 | | H.I.S. Co., Ltd. | | | 2,528,689 | |
| | 293,600 | | H2O Retailing Co. | | | 5,737,236 | |
| | 1,013,200 | | Honda Motor Co., Ltd. | | | 32,383,432 | |
| | 622,420 | | Honeys Co., Ltd. | | | 5,372,273 | |
| | 45,400 | | Hoshizaki Electric Co., Ltd. | | | 2,822,304 | |
| | 375,700 | | Iida Group Holdings Co., Ltd. | | | 6,963,226 | |
| | 1,234,200 | | Isuzu Motors, Ltd. | | | 13,295,592 | |
| | 863,900 | | Keihin Corp. | | | 15,147,940 | |
| | 331,700 | | Konami Holdings Co. | | | 7,895,968 | |
| | 241,400 | | K’s Holdings Corp. | | | 8,220,094 | |
| | 532,300 | | Kuroda Electric Co., Ltd. | | | 9,833,952 | |
| | 389,360 | | NGK Spark Plug Co., Ltd. | | | 10,251,251 | |
| | 1,324,300 | | Nikon Corp. | | | 17,736,979 | |
| | 176,010 | | Nintendo Co., Ltd. | | | 24,203,156 | |
| | 1,944,480 | | Nippon Television Holdings, Inc. | | | 35,368,105 | |
| | 912,800 | | Nishimatsuya Chain Co., Ltd. | | | 7,900,636 | |
| | 682,630 | | Nissan Motor Co., Ltd. | | | 7,147,643 | |
| | 771,400 | | Nissin Kogyo Co., Ltd. | | | 11,189,569 | |
| | 52,465 | | Nitori Holdings Co., Ltd. | | | 4,406,109 | |
| | 249,400 | | Pal Co., Ltd. | | | 5,985,844 | |
| | 4,868,900 | | Pioneer Corp.* | | | 13,403,663 | |
| | 145,100 | | Proto Corp. | | | 1,996,184 | |
| | 365,100 | | Relia, Inc. | | | 3,132,622 | |
| | 15,680 | | Relo Holdings, Inc. | | | 1,892,658 | |
| | 192,100 | | ResortTrust, Inc. | | | 5,067,562 | |
| | 772,000 | | Seiko Holdings Corp. | | | 4,358,733 | |
| | 99,100 | | Shimamura Co., Ltd. | | | 11,605,514 | |
| | 32,041 | | Shimano, Inc. | | | 4,920,170 | |
| | 640,200 | | Takata Corp. | | | 4,263,454 | |
| | 569,087 | | TechnoPro Holdings, Inc. | | | 16,608,861 | |
| | 944,000 | | Teijin, Ltd. | | | 3,217,026 | |
| | 331,900 | | Temp Holdings Co., Ltd. | | | 5,144,664 | |
| | 176,800 | | Tenma Corp. | | | 3,448,717 | |
| | 478,300 | | Tokai Rika Co., Ltd. | | | 11,772,252 | |
| | 982,500 | | Toyo Tire & Rubber Co., Ltd. | | | 19,388,420 | |
| | 699,400 | | Toyoda Gosei Co., Ltd. | | | 15,888,215 | |
| | 468,410 | | Toyota Industries Corp. | | | 25,047,483 | |
| | 41,300 | | TPR Co., Ltd. | | | 1,161,610 | |
| | 176,200 | | Trusco Nakayama Corp. | | | 6,856,025 | |
| | 815,570 | | TV Asahi Holdings Corp. | | | 14,078,673 | |
| | 115,800 | | United Arrows, Ltd. | | | 4,992,268 | |
| | 512,900 | | XEBIO Holdings Co., Ltd. | | | 9,686,114 | |
| | 769,557 | | Yamada Denki Co. | | | 3,324,123 | |
| | 229,500 | | Yondoshi Holdings, Inc. | | | 5,080,565 | |
| | | | | | | 540,888,962 | |
| Consumer Staples — 4.7% | | | | |
| | 229,373 | | Ain Holdings, Inc. | | | 10,936,157 | |
| | 632,280 | | Asahi Group Holdings, Ltd. | | | 19,793,153 | |
| | 378,500 | | Cawachi, Ltd. | | | 7,380,642 | |
| | 230,000 | | Coca-Cola East Japan Co., Ltd. | | | 3,703,856 | |
| | 87,210 | | Cocokara Fine, Inc. | | | 3,915,297 | |
| | 75,200 | | Ezaki Glico Co., Ltd. | | | 4,062,592 | |
| | 73,800 | | Familymart Co. | | | 3,434,274 | |
| | 96,163 | | Heiwado Co., Ltd | | | 2,110,452 | |
| | 185,354 | | Kikkoman Corp. | | | 6,422,040 | |
| | 53,410 | | Kose Corp. | | | 4,938,337 | |
| | 34,956 | | Life Corp. | | | 863,197 | |
| | 69,629 | | MEIJI Holdings Co., Ltd. | | | 5,751,330 | |
| | 325,200 | | Rohto Pharmaceutical Co., Ltd. | | | 6,487,954 | |
| | 148,100 | | Seven & I Holdings Co., Ltd. | | | 6,780,693 | |
| | 65,923 | | Sundrug Co., Ltd. | | | 4,238,635 | |
| | 62,600 | | Tsuruha Holdings, Inc. | | | 5,424,038 | |
| | 112,200 | | Welcia Holdings Co., Ltd. | | | 6,218,194 | |
| | 42,520 | | Yaoko Co., Ltd. | | | 1,784,033 | |
| | | | | | | 104,244,874 | |
| Energy — 1.4% | | | | |
| | 2,074,700 | | Inpex Corp. | | | 20,226,068 | |
| | 432,000 | | Japan Petroleum Exploration Co. | | | 11,602,381 | |
| | | | | | | 31,828,449 | |
| Financials — 15.6% | | | | |
| | 1,168,100 | | Dai-ichi Life Insurance Co., Ltd. | | | 19,434,485 | |
| | 509,000 | | Eighteenth Bank, Ltd. | | | 1,487,745 | |
| | 234,900 | | Hulic Co., Ltd. | | | 2,062,550 | |
| | 79,500 | | IBJ Leasing Co., Ltd. | | | 1,620,477 | |
| | 553,979 | | Japan Exchange Group, Inc. | | | 8,659,675 | |
| | 198,100 | | Kanamoto Co., Ltd. | | | 5,009,870 | |
| | 609,500 | | Kenedix, Inc. | | | 2,189,064 | |
| | 3,915,100 | | Leopalace 21 Corp. | | | 21,191,406 | |
| | 10,225,140 | | Mitsubishi UFJ Financial Group, Inc. | | | 63,337,063 | |
| | 985,000 | | Mitsubishi UFJ Lease & Finance Co., Ltd. | | | 5,069,044 | |
| | 24,464,500 | | Mizuho Financial Group, Inc. | | | 48,929,009 | |
| | 417,800 | | NTT Urban Development Corp. | | | 4,014,343 | |
| | 746,000 | | Oita Bank, Ltd. | | | 2,901,427 | |
| | 1,893,000 | | Shinsei Bank, Ltd. | | | 3,483,670 | |
| | 1,512,685 | | Sony Financial Holdings, Inc. | | | 27,057,770 | |
| | 852,400 | | Sumitomo Mitsui Financial Group, Inc. | | | 32,170,470 | |
| | 4,069,720 | | T&D Holdings, Inc. | | | 53,693,988 | |
| | 1,235,100 | | Takara Leben Co., Ltd. | | | 6,853,806 | |
| | 787,000 | | Tochigi Bank, Ltd. | | | 4,488,587 | |
| | 266,950 | | Tokio Marine Holdings, Inc. | | | 10,310,844 | |
| | 164,340 | | Tokyo TY Financial Group, Inc. | | | 5,500,181 | |
| | 643,000 | | Yamanashi Chuo Bank, Ltd. | | | 3,286,322 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory – WMC Japan Alpha Opportunities FundSchedule of Investments
December 31, 2015 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — (Continued) | | | |
| | | | |
| Japan — (Continued) | | | |
| | | | |
| Financials — (Continued) | | | |
| | 306,200 | | Zenkoku Hosho Co., Ltd. | | | 10,114,799 | |
| | | | | | | 342,866,595 | |
| Health Care — 8.6% | | | | |
| | 245,815 | | Asahi Intecc Co., Ltd. | | | 11,296,181 | |
| | 202,386 | | Chugai Pharmaceutical Co., Ltd. | | | 7,054,492 | |
| | 339,500 | | CMIC Holdings Co., Ltd. | | | 4,323,864 | |
| | 705,200 | | Daiichi Sankyo Co., Ltd. | | | 14,555,122 | |
| | 437,285 | | Eisai Co., Ltd. | | | 28,926,750 | |
| | 218,100 | | EPS Holdings, Inc. | | | 2,402,837 | |
| | 91,685 | | Hoya Corp. | | | 3,749,236 | |
| | 243,000 | | Nippon Shinyaku Co., Ltd. | | | 8,979,890 | |
| | 357,890 | | Olympus Corp. | | | 14,089,653 | |
| | 67,626 | | ONO Pharmaceutical Co., Ltd. | | | 12,058,506 | |
| | 733,701 | | Santen Pharmaceutical Co., Ltd. | | | 12,079,227 | |
| | 365,210 | | Shionogi & Co., Ltd. | | | 16,518,532 | |
| | 143,351 | | Sysmex Corp. | | | 9,195,205 | |
| | 873,300 | | Takeda Pharmaceutical Co., Ltd. | | | 43,542,273 | |
| | | | | | | 188,771,768 | |
| Industrials — 11.1% | | | | |
| | 233,300 | | Bunka Shutter Co., Ltd. | | | 1,974,934 | |
| | 287,300 | | Daifuku Co., Ltd. | | | 4,892,445 | |
| | 163,700 | | Daiseki Co., Ltd. | | | 2,609,568 | |
| | 317,700 | | Denyo Co., Ltd. | | | 4,959,970 | |
| | 109,000 | | DMG Mori Co., Ltd. | | | 1,267,893 | |
| | 202,339 | | East Japan Railway Co. | | | 19,053,443 | |
| | 148,100 | | Fuji Machine Manufacturing Co., Ltd. | | | 1,556,885 | |
| | 1,473,000 | | GS Yuasa Corp. | | | 5,474,267 | |
| | 1,724,200 | | Hino Motors, Ltd. | | | 19,927,372 | |
| | 455,100 | | Hisaka Works, Ltd. | | | 3,625,316 | |
| | 527,100 | | Hitachi Chemical Co., Ltd. | | | 8,362,265 | |
| | 759,240 | | Hitachi Metals, Ltd. | | | 9,367,657 | |
| | 231,000 | | Hitachi Transport System, Ltd. | | | 4,028,226 | |
| | 1,409,100 | | Hosiden Corp. | | | 7,926,038 | |
| | 1,570,000 | | IHI Corp. | | | 4,333,983 | |
| | 161,800 | | Jamco Corp. | | | 5,421,814 | |
| | 216,420 | | Japan Airlines Co., Ltd. | | | 7,746,300 | |
| | 838,000 | | Japan Aviation Electronics Industry, Ltd. | | | 12,020,764 | |
| | 3,291,000 | | Japan Steel Works, Ltd. | | | 11,552,797 | |
| | 447,000 | | Kyudenko Corp. | | | 8,006,946 | |
| | 72,000 | | METAWATER Co., Ltd. | | | 1,764,180 | |
| | 307,700 | | Nippon Densetsu Kogyo Co., Ltd. | | | 6,704,630 | |
| | 300,633 | | Obayashi Corp. | | | 2,774,002 | |
| | 749,800 | | Sanwa Holdings Corp. | | | 5,930,171 | |
| | 194,000 | | Shinmaywa Industries, Ltd. | | | 1,738,400 | |
| | 1,462,040 | | Sumitomo Electric Industries, Ltd. | | | 20,645,221 | |
| | 2,196,000 | | Sumitomo Heavy Industries, Ltd. | | | 9,844,358 | |
| | 790,976 | | Taisei Corp. | | | 5,210,134 | |
| | 418,900 | | Tokyu Construction Co., Ltd. | | | 3,135,854 | |
| | 2,134,000 | | Toshiba Machine Co., Ltd. | | | 7,237,773 | |
| | 3,600,000 | | Toyo Engineering Corp. | | | 9,249,537 | |
| | 422,800 | | Tsubaki Nakashima Co., Ltd. | | | 6,050,301 | |
| | 869,100 | | Ushio, Inc. | | | 11,984,792 | |
| | 94,989 | | West Japan Railway Co. | | | 6,565,928 | |
| | 65,200 | | Zuiko Corp. | | | 2,551,973 | |
| | | | | | | 245,496,137 | |
| Information Technology — 17.5% | | | | |
| | 84,900 | | Alpha Systems, Inc. | | | 1,366,484 | |
| | 191,940 | | Alps Electric Co., Ltd. | | | 5,205,034 | |
| | 802,800 | | Canon, Inc. | | | 24,284,724 | |
| | 880,400 | | DeNA Co., Ltd. | | | 13,766,237 | |
| | 388,100 | | Digital Garage, Inc. | | | 6,925,891 | |
| | 567,966 | | Ferrotec Corp. | | | 6,735,869 | |
| | 14,319,320 | | Fujitsu, Ltd. | | | 71,469,459 | |
| | 1,884,700 | | GREE, Inc. | | | 8,948,681 | |
| | 127,700 | | Hitachi High-Technologies Corp. | | | 3,453,404 | |
| | 61,400 | | Horiba, Ltd. | | | 2,370,839 | |
| | 51,100 | | Iriso Electronics Co., Ltd. | | | 2,871,163 | |
| | 601,700 | | Itochu Techno-Solutions Corp. | | | 11,988,498 | |
| | 336,820 | | Japan Digital Laboratory Co., Ltd. | | | 4,582,981 | |
| | 421,700 | | Melco Holdings, Inc. | | | 7,752,458 | |
| | 358,900 | | Mimasu Semiconductor Industry Co., Ltd. | | | 3,417,335 | |
| | 316,300 | | Miraial Co., Ltd. | | | 2,779,744 | |
| | 450,000 | | Mitsumi Electric Co., Ltd. | | | 2,548,520 | |
| | 1,522,200 | | NET One Systems Co., Ltd. | | | 9,744,858 | |
| | 1,383,300 | | Nichicon Corp. | | | 10,814,001 | |
| | 246,800 | | Nippon Ceramic Co., Ltd. | | | 3,906,958 | |
| | 120,124 | | Nomura Research Institute, Ltd. | | | 4,613,215 | |
| | 175,996 | | OBIC Co., Ltd. | | | 9,316,285 | |
| | 165,700 | | Outsourcing, Inc. | | | 4,355,501 | |
| | 430,700 | | Rohm Co., Ltd. | | | 21,815,329 | |
| | 3,057,000 | | SCREEN Holdings Co., Ltd. | | | 22,501,755 | |
| | 499,263 | | SCSK Corp. | | | 20,059,845 | |
| | 279,000 | | Shimadzu Corp. | | | 4,670,438 | |
| | 762,542 | | Shinkawa, Ltd. | | | 3,929,334 | |
| | 1,903,300 | | Shinko Electric Industries Co., Ltd. | | | 12,201,770 | |
| | 864,200 | | SoftBank Corp. | | | 43,616,524 | |
| | 1,959,600 | | SUMCO Corp. | | | 14,784,197 | |
| | 99,280 | | TDK Corp. | | | 6,358,282 | |
| | 588,800 | | Tokyo Seimitsu Co., Ltd. | | | 13,054,126 | |
| | | | | | | 386,209,739 | |
| Materials — 9.2% | | | | |
| | 566,000 | | Aichi Steel Corp. | | | 2,651,266 | |
| | 531,000 | | Asahi Kasei Corp. | | | 3,590,678 | |
| | 403,700 | | Chubu Steel Plate Co., Ltd. | | | 1,766,348 | |
| | 834,575 | | Daicel Corp. | | | 12,420,066 | |
| | 227,400 | | Fujimi, Inc. | | | 3,147,863 | |
| | 1,183,280 | | JSR Corp. | | | 18,440,652 | |
| | 532,300 | | Kyoei Steel, Ltd. | | | 9,527,729 | |
| | 278,100 | | Maruichi Steel Tube, Ltd. | | | 8,209,941 | |
| | 6,292,810 | | Mitsubishi Materials Corp. | | | 19,820,146 | |
| | 2,394,000 | | Mitsui Chemicals, Inc. | | | 10,617,410 | |
| | 567,800 | | Neturen Co., Ltd. | | | 4,441,602 | |
| | 79,900 | | Nippon Shokubai Co., Ltd. | | | 5,559,846 | |
| | 169,800 | | Nitto Denko Corp. | | | 12,396,365 | |
| | 75,900 | | Osaka Titanium Technologies Co., Ltd. | | | 1,562,133 | |
| | 1,747,000 | | Pacific Metals Co. | | | 4,871,068 | |
| | 252,380 | | Shin-etsu Chemical Co., Ltd. | | | 13,720,856 | |
| | 1,406,000 | | Showa Denko KK | | | 1,646,770 | |
| | 2,538,000 | | Sumitomo Bakelite Co., Ltd. | | | 10,563,199 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory – WMC Japan Alpha Opportunities FundSchedule of Investments
December 31, 2015 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — (Continued) | | | |
| | | | |
| Japan — (Continued) | | | |
| | | | |
| Materials — (Continued) | | | |
| | 945,400 | | Sumitomo Riko Co., Ltd. | | | 7,881,193 | |
| | 4,625,000 | | Taiheiyo Cement Corp. | | | 13,506,429 | |
| | 195,285 | | Tokyo Ohka Kogyo Co., Ltd. | | | 6,205,651 | |
| | 1,887,100 | | Tokyo Steel Manufacturing Co., Ltd. | | | 11,716,147 | |
| | 501,400 | | Yamato Kogyo Co., Ltd. | | | 12,784,682 | |
| | 275,100 | | Yodogawa Steel Works, Ltd. | | | 5,516,819 | |
| | | | | | | 202,564,859 | |
| Telecommunication Services — 2.0% | | | | |
| | 431,000 | | KDDI Corp. | | | 11,193,154 | |
| | 798,750 | | Nippon Telegraph & Telephone Corp. | | | 31,788,746 | |
| | | | | | | 42,981,900 | |
| Total Common Stocks (Cost $1,968,914,337) | | | 2,085,853,283 | |
| | | | | |
| Short-Term Investments — 5.9% | | | | |
| | | | | |
| Money Market Funds — 5.9% | | | | |
| | 128,894,432 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 128,894,432 | |
| Total Short-Term Investments (Cost $128,894,432) | | | 128,894,432 | |
| Total Investments — 100.6% (Cost $2,097,808,769) | | | 2,214,747,715 | |
| Liabilities in Excess of Other Assets — (0.6)% | | | (12,617,434 | ) |
| NET ASSETS — 100.0% | | $ | 2,202,130,281 | |
PORTFOLIO HOLDINGS
% of Net Assets
| Consumer Discretionary | 24.6% |
| Information Technology | 17.5% |
| Financials | 15.6% |
| Industrials | 11.1% |
| Materials | 9.2% |
| Health Care | 8.6% |
| Money Market Funds | 5.9% |
| Consumer Staples | 4.7% |
| Telecommunication Services | 2.0% |
| Energy | 1.4% |
| Other Assets and Liabilities | (0.6)% |
| | 100.0% |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2015. |
Forward Foreign Currency Exchange Contracts (Note 6)
The Brown Advisory — WMC Japan Alpha Opporunities Fund had the following outstanding contracts as of December 31, 2015:
| | | | | | | | | | | Unrealized | |
| | | | | | | Settlement | | | | Appreciation | |
| Currency to be Delivered | | Currency to be Received | | Date | | Counterparty | | (Depreciation) | |
| U.S. Dollars | 103,270,084 | | Japanese Yen | 12,422,565,000 | | 01/29/2016 | | Citibank N.A. | | $ | 148,008 | |
| Japanese Yen | 265,734,442,000 | | U.S. Dollars | 2,196,079,816 | | 01/29/2016 | | RBC Capital Markets | | $ | (16,164,509 | ) |
| | | | | | | | | | | $ | (16,016,501 | ) |
Futures Contracts — Long (Note 7)
The Brown Advisory — WMC Japan Alpha Opporunities Fund had the following open long futures contracts as of December 31, 2015:
Issue | Contracts | Expiration Date | Notional Amount | Unrealized Depreciation |
| TOPIX Index Futures Contracts | 574 | 03/10/2016 | $73,675,085 | $(945,626) |
The accompanying notes are an integral part of these financial statements.
Brown Advisory – Somerset Emerging Markets Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Somerset Emerging Markets Fund Institutional Shares (the “Fund”) declined 14.39% in value while the MSCI Emerging Markets Index (the “Index”), the Fund’s benchmark, fell 17.36%.
For the six months ended December 31, 2015, the Fund’s lack of exposure to energy companies and its consumer staples companies contributed positively to performance. In terms of country effects, it was very much a tale of two quarters, with the strongest performing country (China) during the first quarter becoming the weakest during the second quarter, underscoring the volatility in that market during the period. We only hold one stock there, China Mobile, which is a small weighting in the Fund.
From an individual stock perspective, the most meaningful contributors to the Fund’s performance were Nongshim, OTP Bank and Samsung Fire and Marine. Nongshim, the largest instant noodle company in South Korea, was also the best performing stock on an absolute basis. Nongshim was a buy we made during the third quarter. It has turned around its declining market share since bringing to market a new product that competitors have not been able to replicate. In terms of detractors in the portfolio, the most meaningful were Porto Seguro in Brazil and Sanlam in South Africa. Both suffered from political issues and weak currencies.
We made two buys and two sells during the second half of 2015, although trims and additions pushed up the turnover on an NAV basis to around 14%. The Fund made one buy and one sell in the third and fourth quarter respectively, buying Nongshim and Avivasa, a Turkish insurance company. We sold Public Bank in Malaysia and Smiles, the Brazilian airline points company. Smiles suffered from the leverage of Gol, its associated airline. We believed that Gol would benefit from the fall in the oil price but underestimated its leverage and the impact that this would have on Smiles.
In terms of general outlook, we remain negative in the short term but discriminately bullish in the long term (beyond five years). The further oil price decline and worsening data from China’s economy confirms the emerging market recession scenario, flagged as a possibility in 2014. A cycle of bankruptcies, particularly in the commodity sector, will probably follow. Reliable earnings, such as a selective approach to the consumer sector, may justify trading at a premium. But we are waiting for the cycle to turn. We believe the most interesting opportunities are in beaten down stocks, sectors and countries, where the risks are also greatest. The Fund continues to carry a significant opportunity cost in commodities and China, which remains a short term relative risk. This is something we are reviewing.
Sincerely,
Edward Lam
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. 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 Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks are greater 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 and medium-sized 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.
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.
Brown Advisory – Somerset Emerging Markets Fund
Schedule of Investments
December 31, 2015 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 92.8% | | | |
| | | | |
| Brazil — 3.0% | | | |
| | 135,800 | | Cielo S.A. | | | 1,147,127 | |
| | 1,388,431 | | Porto Seguro S.A.† | | | 10,081,546 | |
| | | | | | | 11,228,673 | |
| Chile — 4.5% | | | | |
| | 3,221,349 | | AFP Habitat S.A.† | | | 3,700,714 | |
| | 8,604,446 | | Aguas Andinas S.A. | | | 4,415,158 | |
| | 616,247 | | Cia Cervecerias Unidas S.A.† | | | 6,818,585 | |
| | 1,399,468 | | Inversiones Aguas Metropolitan† | | | 1,975,622 | |
| | | | | | | 16,910,079 | |
| China — 3.9% | | | | |
| | 1,293,500 | | China Mobile, Ltd. | | | 14,559,773 | |
| | | | | |
| Hungary — 5.3% | | | | |
| | 956,889 | | OTP Bank PLC | | | 19,674,954 | |
| | | | | |
| India — 12.5% | | | | |
| | 1,670,466 | | Axis Bank, Ltd. | | | 11,267,724 | |
| | 1,242,288 | | HCL Technologies, Ltd. | | | 16,021,718 | |
| | 27,287 | | Hero MotoCorp, Ltd. | | | 1,107,236 | |
| | 1,705,137 | | Power Grid Corp. | | | 3,628,605 | |
| | 211,978 | | Shriram Transport Finance Co., Ltd. | | | 2,740,755 | |
| | 1,407,209 | | Wipro, Ltd. | | | 11,860,246 | |
| | | | | | | 46,626,284 | |
| Indonesia — 1.6% | | | | |
| | 26,688,700 | | Telekomunikasi Indonesia | | | 5,977,660 | |
| | | | | |
| Philippines — 7.7% | | | | |
| | 11,090,714 | | Aboitiz Power Corp. | | | 9,818,877 | |
| | 7,833,068 | | Metropolitan Bank & Trust† | | | 13,360,994 | |
| | 123,655 | | Philippine Long Distance Corp. | | | 5,405,955 | |
| | | | | | | 28,585,826 | |
| Poland — 4.4% | | | | |
| | 134,416 | | Bank Pekao S.A. | | | 4,909,247 | |
| | 1,352,520 | | Powszechny Zaklad Ubezpieczen S.A. | | | 11,668,176 | |
| | | | | | | 16,577,423 | |
| Portugal — 0.8% | | | | |
| | 213,515 | | Jeronimo Martins SGPS S.A. | | | 2,778,354 | |
| | | | | |
| South Africa — 6.8% | | | | |
| | 2,781,455 | | Nampak, Ltd. | | | 4,471,309 | |
| | 3,729,459 | | Sanlam, Ltd. | | | 14,588,482 | |
| | 699,482 | | Shoprite Holding, Ltd. | | | 6,482,146 | |
| | | | | | | 25,541,937 | |
| South Korea — 20.2% | | | | |
| | 94,041 | | KT&G Corp. | | | 8,356,966 | |
| | 33,110 | | NCSoft Corp. | | | 5,968,926 | |
| | 729,908 | | Nexen Tire Corp.† | | | 7,634,755 | |
| | 29,611 | | NongShim Co., Ltd. | | | 11,059,147 | |
| | 14,563 | | Samsung Electronics Co., Ltd. | | | 15,532,638 | |
| | 68,741 | | Samsung Fire & Marine Insurance Co., Ltd. | | | 17,969,326 | |
| | 346,817 | | SK Hynix, Inc. | | | 8,959,309 | |
| | | | | | | 75,481,067 | |
| Sweden — 1.0% | | | | |
| | 67,333 | | Millicom International Cellular | | | 3,863,574 | |
| | | | | |
| Taiwan — 9.9% | | | | |
| | 529,000 | | eMemory Technology, Inc. | | | 5,915,817 | |
| | 368,401 | | Formosa International Hotels | | | 2,546,085 | |
| | 2,206,400 | | Merry Electronics Co. | | | 3,906,311 | |
| | 8,651,000 | | Pou Chen Corp. | | | 11,288,872 | |
| | 897,000 | | President Chain Store Corp. | | | 5,598,376 | |
| | 1,823,000 | | Taiwan Semiconductor Manufacturing Co. | | | 7,864,862 | |
| | | | | | | 37,120,323 | |
| Thailand — 0.2% | | | | |
| | 1,780,500 | | Samart Corp. PCL | | | 758,519 | |
| | | | | |
| Turkey — 7.7% | | | | |
| | 1,969,318 | | Aksa Akrilik Kimya Sanayii† | | | 7,059,688 | |
| | 2,194,145 | | Anadolu Hayat Emeklilik A/S† | | | 4,551,699 | |
| | 134,541 | | Avivasa Emeklilik† | | | 772,720 | |
| | 6,818,254 | | Turk Telekomunikasyon A/S† | | | 12,751,716 | |
| | 3,139,654 | | Turkiye Sise ve Cam Fabrikalari A/S | | | 3,431,411 | |
| | | | | | | 28,567,234 | |
| United Arab Emirates — 3.3% | | | | |
| | 1,682,531 | | First Gulf Bank | | | 5,777,927 | |
| | 2,320,432 | | National Bank Abu Dhabi† | | | 5,016,392 | |
| | 1,249,893 | | Union National Bank | | | 1,592,567 | |
| | | | | | | 12,386,886 | |
| Total Common Stocks (Cost $398,950,013) | | | 346,638,566 | |
| | | | | |
| Preferred Stocks — 0.6% | | | | |
| | | | | |
| Brazil — 0.6% | | | | |
| | 597,300 | | AES Tiete S.A. | | | 2,179,072 | |
| Total Preferred Stocks (Cost $3,335,257) | | | 2,179,072 | |
| | | | | | | | |
| Warrants — 0.0% | | | | |
| | | | | |
| Thailand — 0.0% | | | | |
| | 400,760 | | Samart Corp. PCL | | | 12,473 | |
| Total Warrants (Cost $36,189) | | | 12,473 | |
| | | | | |
| Short-Term Investments — 6.5% | | | | |
| | | | | |
| Money Market Funds — 6.5% | | | | |
| | 24,325,073 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 24,325,073 | |
| Total Short-Term Investments (Cost $24,325,073) | | | 24,325,073 | |
| Total Investments — 99.9% (Cost $426,646,532) | | | 373,155,184 | |
| Other Assets in Excess of Liabilities — 0.1% | | | 314,544 | |
| NET ASSETS — 100.0% | | $ | 373,469,728 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory – Somerset Emerging Markets Fund
Schedule of Investments
December 31, 2015 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
| South Korea | 20.2% |
| India | 12.5% |
| Taiwan | 9.9% |
| Turkey | 7.7% |
| Philippines | 7.7% |
| South Africa | 6.8% |
| Money Market Funds | 6.5% |
| Hungary | 5.3% |
| Chile | 4.5% |
| Poland | 4.4% |
| China | 3.9% |
| Brazil | 3.6% |
| United Arab Emirates | 3.3% |
| Indonesia | 1.6% |
| Sweden | 1.0% |
| Portugal | 0.8% |
| Thailand | 0.2% |
| Other Assets and Liabilities | 0.1% |
| | 100.0% |
| † | All or a portion of this security is considered illiquid. At December 31, 2015, the total market value of securities considered illiquid was $31,377,163 or 8.4% of net assets. |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Emerging Markets Small-Cap Fund
A Message to Our Shareholders
December 31, 2015
Dear Shareholder:
During the six-month period ended December 31, 2015, the Brown Advisory Emerging Markets Small-Cap Fund Institutional Shares (the “Fund”) declined 13.17% in value. During the same period, the MSCI Emerging Markets Small-Cap Index (the “Index”), the Fund’s benchmark, fell 13.95%.
During the second half of 2015, the Fund’s performance was helped by an emphasis on emerging Asia. The MSCI Emerging Markets Asia Small-Cap Index declined 12.52% in the second half of 2015, outperforming the broad Emerging Markets Small-Cap index by nearly 1.5%. Additionally, strong stock selection in health care companies in India and China contributed positively to performance. These contributors were partially offset by an overweight in utilities companies, which came under pressure because of speculation about possible reductions in tariffs.
From an individual stock perspective, Aurobindo Pharma, an Indian pharmaceutical company, and Techtronic Industries, a Chinese-branded power tools manufacturer, contributed to performance:
| | • | Aurobindo Pharma rose 16%. The company announced it received U.S. Food and Drug Administration (FDA) approval for several drugs. Aurobindo now has a total of 224 Abbreviated New Drug Application (generic) approvals from the FDA. |
| | • | Techtronic Industries rose 25%. Investor sentiment rose following a better-than-expected sales growth report from its largest customer, Home Depot, and U.S. housing statistics showing signs of improvement. |
The largest detractors from performance were Kepco Plant Service & Engineering, a Korean power plant maintenance company, and Hyundai Department Store, a Korean department store:
| | • | Kepco Plant Service & Engineering fell 28%. Lingering concerns of weak overseas orders and lower earnings during the fourth quarter of 2015 weighed on investor sentiment. |
| | • | Hyundai Department Store declined 18%. Sentiment remains weak after the company did not win a downtown Seoul duty-free operating license. Nevertheless, their newly opened downtown department store is attracting a lot of traffic and Chinese tourists are returning to South Korea following the Middle East Respiratory Syndrome (“MERS”). |
We have been conservative and remained disciplined during the volatile year of 2015. We remain focused on corporate governance, domestic demand and local consumption, while avoiding cyclical sectors and exporters. Recently, we took profit in South Korea given strong performance and the fact that valuations were rich on some stocks. We took advantage of market volatility and added to companies at attractive valuations upon correction, such as tourism-related stocks in Thailand.
The team remains true to its investment discipline. This includes a bias toward high quality, an aversion to risk and a preference for companies focused on domestic demand. The Fund favors companies that are conservatively capitalized with a long-term track record of profitable growth and diversified financials in Hong Kong/China.
Valuation and earnings quality remain key to stock selection across the region, especially given the recent market volatility that has been driven by non-fundamental and external factors. With increased uncertainty over external demand and market volatility, especially in China, the Fund has remained conservative and has owned what we believe are undervalued companies that have the potential to grow with local consumption over the long run.
We continue to believe the key to generating excess returns is to identify smaller emerging companies that are focused on emerging markets structural growth trends and are mispriced by the market. Our investment discipline combines a value-oriented process with a search for higher-quality growth companies. By investing with managers who apply this discipline in markets that are realizing stronger economic growth, we believe that we can potentially deliver favorable results over various market cycles.
Sincerely,
Paul Chew, CFA
Portfolio Manager
Brown Advisory Emerging Markets Small-Cap FundA Message to Our Shareholders
December 31, 2015
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.
Brown Advisory Emerging Markets Small-Cap FundSchedule of Investments
December 31, 2015 (Unaudited)
| Shares | | Security Description | | Value $ | |
| | | | |
| Common Stocks — 93.6% | | | |
| | | | |
| China — 32.8% | | | |
| | 1,005,000 | | Bloomage Biotechno Corp., Ltd.† | | | 2,485,105 | |
| | 3,520,000 | | China Medical System Holdings, Ltd. | | | 5,158,786 | |
| | 13,349,000 | | China Power International Development, Ltd. | | | 7,684,140 | |
| | 1,058,000 | | China State Construction International | | | | |
| | | | Holdings, Ltd. | | | 1,829,611 | |
| | 3,383,800 | | China Taiping Insurance Holdings Co., Ltd.* | | | 10,386,612 | |
| | 5,686,000 | | China Travel International Investment | | | | |
| | | | Hong Kong, Ltd. | | | 2,378,139 | |
| | 4,406,000 | | CITIC Telecom International Holdings, Ltd.† | | | 1,678,691 | |
| | 4,116,000 | | Huaneng Renewables Corp. | | | 1,221,520 | |
| | 4,059,000 | | Lee & Man Paper Manufacturing, Ltd. | | | 2,257,698 | |
| | 3,035,500 | | Luye Pharma Group, Ltd.* | | | 3,158,197 | |
| | 1,716,000 | | Nexteer Automotive Group, Ltd. | | | 1,899,019 | |
| | 5,460,000 | | Shandong Weigao Group Medical | | | | |
| | | | Polymer Co., Ltd. | | | 3,733,429 | |
| | 1,355,500 | | Techtronic Industries Co., Ltd. | | | 5,487,396 | |
| | 1,961,000 | | Tong Ren Tang Technologies Co., Ltd.† | | | 3,208,164 | |
| | 2,771,000 | | Towngas China Co., Ltd. | | | 1,605,346 | |
| | 2,969,000 | | Value Partners Group, Ltd. | | | 3,451,015 | |
| | 2,868,000 | | Wasion Group Holdings, Ltd.† | | | 2,967,797 | |
| | 6,344,000 | | Xinyi Solar Holdings, Ltd. | | | 2,571,938 | |
| | 4,092,000 | | Zhejiang Expressway Co., Ltd. | | | 4,889,298 | |
| | | | | | | 68,051,901 | |
| India — 12.2% | | | | |
| | 591,408 | | Aurobindo Pharma, Ltd. | | | 7,800,403 | |
| | 1,537,909 | | Exide Industries, Ltd.† | | | 3,394,352 | |
| | 104,042 | | Strides Arcolab, Ltd. | | | 2,019,409 | |
| | 724,173 | | UPL, Ltd. | | | 4,769,125 | |
| | 661,109 | | Yes Bank, Ltd. | | | 7,213,207 | |
| | | | | | | 25,196,496 | |
| Indonesia — 0.9% | | | | |
| | 1,451,900 | | Matahari Department Store TBK | | | 1,838,010 | |
| | | | | |
| Malaysia — 0.9% | | | | |
| | 1,941,700 | | Westports Holdings Bhd. | | | 1,857,872 | |
| | | | | |
| Philippines — 2.0% | | | | |
| | 17,208,000 | | Megaworld Corp. | | | 1,550,298 | |
| | 1,217,200 | | Robinsons Retail Holdings, Inc.† | | | 1,630,781 | |
| | 348,220 | | Security Bank Corp. | | | 1,047,668 | |
| | | | | | | 4,228,747 | |
| Singapore — 3.2% | | | | |
| | 2,485,200 | | Comfortdelgro Corp., Ltd. | | | 5,321,493 | |
| | 710,400 | | M1, Ltd. | | | 1,359,873 | |
| | | | | | | 6,681,366 | |
| South Korea — 23.4% | | | | |
| | 10,552 | | Cuckoo Electronics Co., Ltd. | | | 2,048,526 | |
| | 26,694 | | E-Mart Co., Ltd | | | 4,283,308 | |
| | 46,004 | | Hana Tour Service, Inc. | | | 4,474,514 | |
| | 92,811 | | Hanon Systems Corp. | | | 4,075,899 | |
| | 64,090 | | Hotel Shilla Co., Ltd. | | | 4,196,559 | |
| | 63,376 | | Hyundai Department Store Co., Ltd. | | | 6,792,475 | |
| | 71,903 | | KEPCO Plant Service & Engineering Co., Ltd. | | | 5,439,011 | |
| | 78,161 | | Korea Kolmar Co., Ltd. | | | 6,268,466 | |
| | 43,539 | | Loen Entertainment, Inc. | | | 3,104,218 | |
| | 14,111 | | Medy-Tox, Inc. | | | 6,097,613 | |
| | 61,590 | | Modetour Network, Inc. | | | 1,759,218 | |
| | | | | | | 48,539,807 | |
| Taiwan — 11.1% | | | | |
| | 444,000 | | Catcher Technology Co., Ltd. | | | 3,701,370 | |
| | 224,000 | | Cleanaway Co., Ltd. | | | 1,184,670 | |
| | 363,000 | | Cub Elecparts, Inc. | | | 4,316,996 | |
| | 77,000 | | Gourmet Master Co., Ltd. | | | 547,865 | |
| | 878,000 | | Hota Industrial Mfg. Co., Ltd. | | | 3,212,511 | |
| | 217,000 | | King Slide Works Co., Ltd. | | | 2,804,698 | |
| | 2,613,000 | | King’s Town Bank† | | | 1,852,945 | |
| | 775,000 | | Makalot Industrial Co., Ltd. | | | 5,459,534 | |
| | | | | | | 23,080,589 | |
| Thailand — 7.1% | | | | |
| | 706,400 | | Bumrungrad Hospital Public Co., Ltd. | | | 4,124,507 | |
| | 2,200,000 | | Central Plaza Hotel | | | 2,675,163 | |
| | 3,385,421 | | Major Cineplex Group Public Co., Ltd.† | | | 3,306,035 | |
| | 3,064,200 | | Minor International Public Co.. Ltd. | | | 3,068,957 | |
| | 1,963,000 | | Thaicom Public Co., Ltd. | | | 1,574,862 | |
| | | | | | | 14,749,524 | |
| Total Common Stocks (Cost $198,503,320) | | | 194,224,312 | |
| | | | | |
| Real Estate Investment Trusts — 0.9% | | | | |
| | | | | |
| Singapore — 0.9% | | | | |
| | 2,994,400 | | Mapletree Greater China Commercial Trust† | | | 1,927,744 | |
| Total Real Estate Investment Trusts (Cost $2,248,677) | | | 1,927,744 | |
| | | | | |
| Mutual Funds — 0.6% | | | | |
| | | | | |
| Thailand — 0.6% | | | | |
| | 3,434,200 | | Digital Telecommunications | | | | |
| | | | Infrastructure Fund | | | 1,182,351 | |
| Total Mutual Funds (Cost $1,209,613) | | | 1,182,351 | |
| | | | | |
| Warrants — 0.0% | | | | |
| | | | | |
| China — 0.0% | | | | |
| | 86,250 | | Ju Teng International Holdings, Ltd. | | | 2,337 | |
| Total Warrants (Cost $–) | | | 2,337 | |
| | | | | |
| Short-Term Investments — 5.0% | | | | |
| | | | | |
| Money Market Funds — 5.0% | | | | |
| | 10,329,525 | | DWS Cash Account Trust — Government | | | | |
| | | | & Agency Securities Portfolio — | | | | |
| | | | Institutional Shares, 0.04%# | | | 10,329,525 | |
| Total Short-Term Investments (Cost $10,329,525) | | | 10,329,525 | |
| Total Investments — 100.1% (Cost $212,291,135) | | | 207,666,269 | |
| Liabilities in Excess of Other Assets — (0.1)% | | | (284,938 | ) |
| NET ASSETS — 100.0% | | $ | 207,381,331 | |
The accompanying notes are an integral part of these financial statements.
Brown Advisory Emerging Markets Small-Cap FundSchedule of Investments
December 31, 2015 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
| China | 32.8% |
| South Korea | 23.4% |
| India | 12.2% |
| Taiwan | 11.1% |
| Thailand | 7.7% |
| Money Market Funds | 5.0% |
| Singapore | 4.1% |
| Philippines | 2.0% |
| Malaysia | 0.9% |
| Indonesia | 0.9% |
| Other Assets and Liabilities | (0.1)% |
| | 100.0% |
| † | All or a portion of this security is considered illiquid. At December 31, 2015, the total market value of securities considered illiquid was $4,562,926 or 2.2% of net assets. |
| * | Non-Income Producing |
| # | Annualized seven-day yield as of December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Statements of Assets and Liabilities
December 31, 2015 (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 | | $ | 1,654,735,134 | | | $ | 100,381,702 | | | $ | 249,028,939 | | | $ | 132,134,632 | |
| Net unrealized appreciation | | | 718,321,945 | | | | 19,287,725 | | | | 51,690,579 | | | | 30,968,319 | |
| Total investments, at market value | | | 2,373,057,079 | | | | 119,669,427 | | | | 300,719,518 | | | | 163,102,951 | |
| Foreign Currency (Cost of $—, $—, $30,271 and $—, respectively) | | | — | | | | — | | | | 30,378 | | | | — | |
| Receivables: | | | | | | | | | | | | | | | | |
| Investment securities sold | | | 4,016,019 | | | | — | | | | — | | | | — | |
| Fund shares sold | | | 2,954,917 | | | | 4,612 | | | | 2,123,603 | | | | 336,392 | |
| Interest and dividends | | | 1,364,706 | | | | 345,083 | | | | 230,204 | | | | 566,013 | |
| Prepaid expenses and other assets | | | 119,632 | | | | 40,075 | | | | 51,801 | | | | 46,653 | |
| Total Assets | | | 2,381,512,353 | | | | 120,059,197 | | | | 303,155,504 | | | | 164,052,009 | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Payables: | | | | | | | | | | | | | | | | |
| Investment securities purchased | | | 2,929,078 | | | | — | | | | — | | | | — | |
| Fund shares redeemed | | | 2,980,852 | | | | 506,056 | | | | 141,626 | | | | 449,940 | |
| Accrued Liabilities: | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 1,223,406 | | | | 66,165 | | | | 152,781 | | | | 86,016 | |
| Administration, accounting, and transfer agent fees | | | 250,296 | | | | 16,162 | | | | 31,673 | | | | 19,978 | |
| Custodian fees | | | 20,269 | | | | 3,255 | | | | 5,800 | | | | 1,815 | |
| Service fees | | | 272,650 | | | | 16,540 | | | | 36,333 | | | | 19,254 | |
| Business management fees | | | 101,951 | | | | 5,514 | | | | 12,732 | | | | 7,168 | |
| Distribution fees | | | 24,248 | | | | 679 | | | | 6,561 | | | | 1,839 | |
| Other liabilities | | | 40,958 | | | | 15,891 | | | | 18,014 | | | | 16,174 | |
| Total Liabilities | | | 7,843,708 | | | | 630,262 | | | | 405,520 | | | | 602,184 | |
| NET ASSETS | | $ | 2,373,668,645 | | | $ | 119,428,935 | | | $ | 302,749,984 | | | $ | 163,449,825 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 1,659,355,498 | | | $ | 107,255,606 | | | $ | 258,718,727 | | | $ | 133,362,516 | |
| Undistributed (Accumulated) net investment income (loss) | | | (2,984,495 | ) | | | 1,028,356 | | | | 11,577 | | | | (77,154 | ) |
| Accumulated net realized gain (loss) | | | (1,024,303 | ) | | | (8,142,752 | ) | | | (7,671,028 | ) | | | (803,856 | ) |
| Unrealized appreciation on investments | | | 718,321,945 | | | | 19,287,725 | | | | 51,690,579 | | | | 30,968,319 | |
| Unrealized appreciation – foreign receivables | | | — | | | | — | | | | 129 | | | | — | |
| NET ASSETS | | $ | 2,373,668,645 | | | $ | 119,428,935 | | | $ | 302,749,984 | | | $ | 163,449,825 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 258,369,064 | | | $ | 12,738 | | | $ | 17,245,647 | | | $ | 17,885,783 | |
| Shares outstanding (unlimited shares authorized) | | | 13,275,918 | | | | 917 | | | | 1,117,837 | | | | 1,454,212 | |
| Net asset value per share | | $ | 19.46 | | | $ | 13.89 | | | $ | 15.43 | | | $ | 12.30 | |
| Investor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 2,077,177,166 | | | $ | 118,383,011 | | | $ | 275,361,322 | | | $ | 142,803,168 | |
| Shares outstanding (unlimited shares authorized) | | | 107,212,850 | | | | 8,516,663 | | | | 17,869,560 | | | | 11,617,103 | |
| Net asset value per share | | $ | 19.37 | | | $ | 13.90 | | | $ | 15.41 | | | $ | 12.29 | |
| Advisor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 38,122,415 | | | $ | 1,033,186 | | | $ | 10,143,015 | | | $ | 2,760,874 | |
| Shares outstanding (unlimited shares authorized) | | | 2,041,305 | | | | 73,738 | | | | 657,447 | | | | 224,905 | |
| Net asset value per share | | $ | 18.68 | | | $ | 14.01 | | | $ | 15.43 | | | $ | 12.28 | |
The accompanying notes are an integral part of these financial statements.
Statements of Assets and Liabilities
December 31, 2015 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY | |
| | | SUSTAINABLE | | | SMALL-CAP | | | SMALL-CAP | | | MULTI- | |
| | | GROWTH | | | GROWTH | | | FUNDAMENTAL | | | STRATEGY | |
| | | FUND | | | FUND | | | VALUE FUND | | | FUND | |
| ASSETS | | | | | | | | | | | | |
| Investments: | | | | | | | | | | | | |
| Total investments – unaffiliated, at cost | | $ | 236,603,484 | | | $ | 194,102,187 | | | $ | 765,458,950 | | | $ | 85,969 | |
| Total investments – affiliated, at cost (Note 3) | | | — | | | | — | | | | — | | | | 2,952,443 | |
| Total cost of investments | | | 236,603,484 | | | | 194,102,187 | | | | 765,458,950 | | | | 3,038,412 | |
| Net unrealized appreciation – unaffiliated | | | 74,148,371 | | | | 73,102,618 | | | | 76,096,050 | | | | — | |
| Net unrealized depreciation – affiliated (Note 3) | | | — | | | | — | | | | — | | | | (97,747 | ) |
| Total unrealized appreciation (depreciation) | | | 74,148,371 | | | | 73,102,618 | | | | 76,096,050 | | | | (97,747 | ) |
| Total investments, at market value | | | 310,751,855 | | | | 267,204,805 | | | | 841,555,000 | | | | 2,940,665 | |
| Foreign Currency (Cost of $22,906, $—, $— and $—, respectively) | | | 22,987 | | | | — | | | | — | | | | — | |
| Receivables: | | | | | | | | | | | | | | | | |
| Investment securities sold | | | — | | | | — | | | | — | | | | — | |
| Fund shares sold | | | 2,454,938 | | | | 848,337 | | | | 4,687,170 | | | | 1,087 | |
| Interest and dividends | | | 195,933 | | | | 115,199 | | | | 1,393,686 | | | | 6 | |
| Expense Reimbursement due from Adviser, net | | | — | | | | — | | | | — | | | | 1,978 | |
| Prepaid expenses and other assets | | | 38,738 | | | | 39,026 | | | | 75,322 | | | | 19,919 | |
| Total Assets | | | 313,464,451 | | | | 268,207,367 | | | | 847,711,178 | | | | 2,963,655 | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Payables: | | | | | | | | | | | | | | | | |
| Investment securities purchased | | | 3,445,416 | | | | 501,348 | | | | — | | | | — | |
| Fund shares redeemed | | | 115,051 | | | | 585,128 | | | | 2,336,966 | | | | — | |
| Distributions | | | — | | | | — | | | | — | | | | — | |
| Accrued Liabilities: | | | | | | | | | | | | | | | | |
| Investment advisory fees, net | | | 154,408 | | | | 198,623 | | | | 619,527 | | | | — | |
| Administration, accounting, and transfer agent fees | | | 28,353 | | | | 27,979 | | | | 96,044 | | | | 323 | |
| Custodian fees | | | 1,137 | | | | 3,211 | | | | 10,814 | | | | 517 | |
| Service fees | | | 28,267 | | | | 33,402 | | | | 96,439 | | | | — | |
| Business management fees | | | 12,867 | | | | 11,684 | | | | 36,443 | | | | 125 | |
| Distribution fees | | | 124,918 | | | | 3,478 | | | | 34,072 | | | | — | |
| Other liabilities | | | 5,176 | | | | 16,034 | | | | 1,782 | | | | 11,284 | |
| Total Liabilities | | | 3,915,593 | | | | 1,380,887 | | | | 3,232,087 | | | | 12,249 | |
| NET ASSETS | | $ | 309,548,858 | | | $ | 266,826,480 | | | $ | 844,479,091 | | | $ | 2,951,406 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 244,460,386 | | | $ | 190,747,426 | | | $ | 771,668,533 | | | $ | 3,047,654 | |
| Accumulated net investment income (loss) | | | (932,263 | ) | | | (1,379,397 | ) | | | (724,813 | ) | | | (5,362 | ) |
| Accumulated net realized gain (loss) | | | (8,127,717 | ) | | | 4,355,833 | | | | (2,560,679 | ) | | | 6,861 | |
| Unrealized appreciation (depreciation) on investments | | | 74,148,371 | | | | 73,102,618 | | | | 76,096,050 | | | | (97,747 | ) |
| Unrealized appreciation – foreign receivables | | | 81 | | | | — | | | | — | | | | — | |
| NET ASSETS | | $ | 309,548,858 | | | $ | 266,826,480 | | | $ | 844,479,091 | | | $ | 2,951,406 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 82,233,264 | | | $ | 12,878,024 | | | $ | 104,413,022 | | | $ | 2,951,406 | |
| Shares outstanding (unlimited shares authorized) | | | 5,218,486 | | | | 424,077 | | | | 4,805,044 | | | | 304,810 | |
| Net asset value per share | | $ | 15.76 | | | $ | 30.37 | | | $ | 21.73 | | | $ | 9.68 | |
| Investor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 17,493,176 | | | $ | 248,066,949 | | | $ | 687,800,827 | | | $ | — | |
| Shares outstanding (unlimited shares authorized) | | | 1,116,758 | | | | 16,268,090 | | | | 31,657,079 | | | | — | |
| Net asset value per share | | $ | 15.66 | | | $ | 15.25 | | | $ | 21.73 | | | $ | — | |
| Advisor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 209,822,418 | | | $ | 5,881,507 | | | $ | 52,265,242 | | | $ | — | |
| Shares outstanding (unlimited shares authorized) | | | 13,516,636 | | | | 401,555 | | | | 2,413,533 | | | | — | |
| Net asset value per share | | $ | 15.52 | | | $ | 14.65 | | | $ | 21.66 | | | $ | — | |
The accompanying notes are an integral part of these financial statements.
Statements of Assets and Liabilities
December 31, 2015 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY | |
| | | GLOBAL | | | INTERMEDIATE | | | TOTAL | | | STRATEGIC | |
| | | LEADERS | | | INCOME | | | RETURN | | | BOND | |
| | | FUND | | | FUND | | | FUND | | | FUND | |
| ASSETS | | | | | | | | | | | | |
| Investments: | | | | | | | | | | | | |
| Total investments – unaffiliated, at cost | | $ | 18,387,049 | | | $ | 112,852,750 | | | $ | 85,052,379 | | | $ | 59,817,385 | |
| Total investments – affiliated, at cost (Note 3) | | | — | | | | 37,384,761 | | | | — | | | | — | |
| Total cost of investments | | | 18,387,049 | | | | 150,237,511 | | | | 85,052,379 | | | | 59,817,385 | |
| Net unrealized appreciation (depreciation) – unaffiliated | | | 770,102 | | | | (277,592 | ) | | | (869,963 | ) | | | (735,756 | ) |
| Net unrealized appreciation (depreciation) – affiliated (Note 3) | | | — | | | | (555,101 | ) | | | — | | | | — | |
| Total unrealized appreciation (depreciation) | | | 770,102 | | | | (832,693 | ) | | | (869,963 | ) | | | (735,756 | ) |
| Total investments, at market value | | | 19,157,151 | | | | 149,404,818 | | | | 84,182,416 | | | | 59,081,629 | |
| Deposit at broker – futures contracts (Note 7) | | | — | | | | — | | | | 135,809 | | | | 150,633 | |
| Gross Unrealized Appreciation – futures contracts (Note 7) | | | — | | | | — | | | | 97,330 | | | | 16,706 | |
| Receivables: | | | | | | | | | | | | | | | | |
| Investment securities sold | | | — | | | | 1,742 | | | | — | | | | — | |
| Fund shares sold | | | 1,202,800 | | | | 964,454 | | | | 129,205 | | | | 1,287 | |
| Interest and dividends | | | 5,147 | | | | 642,820 | | | | 527,408 | | | | 402,905 | |
| Prepaid expenses and other assets | | | 31,640 | | | | 28,849 | | | | 31,007 | | | | 31,798 | |
| Total Assets | | | 20,396,738 | | | | 151,042,683 | | | | 85,103,175 | | | | 59,684,958 | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Gross Unrealized Depreciation – futures contracts (Note 7) | | | — | | | | — | | | | — | | | | — | |
| Payables: | | | | | | | | | | | | | | | | |
| Investment securities purchased | | | 1,320,520 | | | | — | | | | 6,947,098 | | | | 14,883,420 | |
| Fund shares redeemed | | | — | | | | 286,012 | | | | — | | | | 37,506 | |
| Distributions | | | — | | | | — | | | | — | | | | — | |
| Accrued Liabilities: | | | | | | | | | | | | | | | | |
| Investment advisory fees, net | | | 1,266 | | | | 29,653 | | | | 19,725 | | | | 14,172 | |
| Administration, accounting, and transfer agent fees | | | 907 | | | | 19,083 | | | | 10,840 | | | | 8,971 | |
| Custodian fees | | | 10,126 | | | | 1,824 | | | | 2,391 | | | | 1,876 | |
| Service fees | | | 1,968 | | | | 6,511 | | | | 63 | | | | 1,968 | |
| Business management fees | | | 656 | | | | 6,511 | | | | 3,287 | | | | 1,968 | |
| Distribution fees | | | — | | | | 5,790 | | | | — | | | | 835 | |
| Other liabilities | | | 13,361 | | | | 16,242 | | | | 13,416 | | | | 13,367 | |
| Total Liabilities | | | 1,348,804 | | | | 371,626 | | | | 6,996,820 | | | | 14,964,083 | |
| NET ASSETS | | $ | 19,047,934 | | | $ | 150,671,057 | | | $ | 78,106,355 | | | $ | 44,720,875 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 18,870,016 | | | | 152,590,908 | | | $ | 80,243,199 | | | $ | 48,590,664 | |
| Accumulated net investment income (loss) | | | 4,902 | | | | (228,041 | ) | | | (74,940 | ) | | | (169,881 | ) |
| Accumulated net realized gain (loss) | | | (596,945 | ) | | | (859,117 | ) | | | (1,289,271 | ) | | | (2,980,858 | ) |
| Unrealized appreciation (depreciation) on investments | | | 770,102 | | | | (832,693 | ) | | | (869,963 | ) | | | (735,756 | ) |
| Unrealized depreciation – foreign receivables | | | (141 | ) | | | — | | | | — | | | | — | |
| Unrealized appreciation – futures contracts (Note 7) | | | — | | | | — | | | | 97,330 | | | | 16,706 | |
| NET ASSETS | | $ | 19,047,934 | | | $ | 150,671,057 | | | $ | 78,106,355 | | | $ | 44,720,875 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | — | | | $ | — | | | $ | 76,641,954 | | | $ | — | |
| Shares outstanding (unlimited shares authorized) | | | — | | | | — | | | | 7,845,391 | | | | — | |
| Net asset value per share | | $ | — | | | $ | — | | | $ | 9.77 | | | $ | — | |
| Investor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 19,047,934 | | | $ | 141,573,570 | | | $ | 1,464,401 | | | $ | 43,857,051 | |
| Shares outstanding (unlimited shares authorized) | | | 1,926,422 | | | | 13,464,218 | | | | 149,913 | | | | 4,676,196 | |
| Net asset value per share | | $ | 9.89 | | | $ | 10.51 | | | $ | 9.77 | | | $ | 9.38 | |
| Advisor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | — | | | $ | 9,097,487 | | | $ | — | | | $ | 863,824 | |
| Shares outstanding (unlimited shares authorized) | | | — | | | | 882,819 | | | | — | | | | 92,047 | |
| Net asset value per share | | $ | — | | | $ | 10.31 | | | $ | — | | | $ | 9.38 | |
The accompanying notes are an integral part of these financial statements.
Statements of Assets and Liabilities
December 31, 2015 (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 | | $ | 184,494,815 | | | $ | 219,929,092 | | | $ | 394,255,407 | | | $ | 1,115,799,391 | |
| Net unrealized appreciation (depreciation) | | | 2,740,215 | | | | 1,892,311 | | | | (1,848,425 | ) | | | 7,455,586 | |
| Total investments, at market value | | | 187,235,030 | | | | 221,821,403 | | | | 392,406,982 | | | | 1,123,254,977 | |
| Receivables: | | | | | | | | | | | | | | | | |
| Investment securities sold | | | — | | | | — | | | | 9,012,756 | | | | — | |
| Fund shares sold | | | 91,646 | | | | 1,358,750 | | | | 25,000 | | | | 4,183,259 | |
| Interest and dividends | | | 2,548,096 | | | | 2,398,896 | | | | 1,286,965 | | | | 460,345 | |
| Prepaid expenses and other assets | | | 7,332 | | | | 19,723 | | | | 34,780 | | | | 378,240 | |
| Total Assets | | | 189,882,104 | | | | 225,598,772 | | | | 402,766,483 | | | | 1,128,276,821 | |
| LIABILITIES | | | | | | | | | | | | | | | | |
| Payables: | | | | | | | | | | | | | | | | |
| Investment securities purchased | | | 25,329 | | | | 135,035 | | | | 65,970,355 | | | | — | |
| Fund shares redeemed | | | 1,502,456 | | | | 379,877 | | | | — | | | | 557,229 | |
| Distributions | | | 266,944 | | | | 381,364 | | | | — | | | | — | |
| Accrued Liabilities: | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 47,991 | | | | 56,413 | | | | 82,359 | | | | 853,218 | |
| Administration, accounting, and transfer agent fees | | | 28,750 | | | | 30,050 | | | | 41,982 | | | | 114,094 | |
| Custodian fees | | | 1,751 | | | | 1,971 | | | | 3,422 | | | | 61,418 | |
| Service fees | | | 7,998 | | | | 9,402 | | | | 85 | | | | 1,556 | |
| Business management fees | | | 7,998 | | | | 9,402 | | | | 13,726 | | | | 47,401 | |
| Distribution fees | | | — | | | | — | | | | — | | | | 549 | |
| Other liabilities | | | 17,942 | | | | 16,776 | | | | 14,103 | | | | 59,195 | |
| Total Liabilities | | | 1,907,159 | | | | 1,020,290 | | | | 66,126,032 | | | | 1,694,660 | |
| NET ASSETS | | $ | 187,974,945 | | | $ | 224,578,482 | | | $ | 336,640,451 | | | $ | 1,126,582,161 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | | | | | |
| Paid-in capital | | $ | 185,310,960 | | | $ | 224,766,026 | | | $ | 339,150,197 | | | $ | 1,141,634,714 | |
| Accumulated net investment income (loss) | | | (26 | ) | | | (399 | ) | | | (494,809 | ) | | | (845,498 | ) |
| Accumulated net realized gain (loss) | | | (76,204 | ) | | | (2,079,456 | ) | | | (166,512 | ) | | | (21,627,820 | ) |
| Unrealized appreciation (depreciation) on investments | | | 2,740,215 | | | | 1,892,311 | | | | (1,848,425 | ) | | | 7,455,586 | |
| Unrealized depreciation – foreign receivables | | | — | | | | — | | | | — | | | | (34,821 | ) |
| NET ASSETS | | $ | 187,974,945 | | | $ | 224,578,482 | | | $ | 336,640,451 | | | $ | 1,126,582,161 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | — | | | $ | — | | | $ | 334,930,423 | | | $ | 1,113,788,197 | |
| Shares outstanding (unlimited shares authorized) | | | — | | | | — | | | | 33,494,794 | | | | 109,610,377 | |
| Net asset value per share | | $ | — | | | $ | — | | | $ | 10.00 | | | $ | 10.16 | |
| Investor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | 187,974,945 | | | $ | 224,578,482 | | | $ | 1,710,028 | | | $ | 11,870,347 | |
| Shares outstanding (unlimited shares authorized) | | | 17,556,270 | | | | 22,399,791 | | | | 170,964 | | | | 1,166,930 | |
| Net asset value per share | | $ | 10.71 | | | $ | 10.03 | | | $ | 10.00 | | | $ | 10.17 | |
| Advisor Shares: | | | | | | | | | | | | | | | | |
| Net assets | | $ | — | | | $ | — | | | $ | — | | | $ | 923,617 | |
| Shares outstanding (unlimited shares authorized) | | | — | | | | — | | | | — | | | | 91,141 | |
| Net asset value per share | | $ | — | | | $ | — | | | $ | — | | | $ | 10.13 | |
The accompanying notes are an integral part of these financial statements.
Statements of Assets and Liabilities
December 31, 2015 (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 | | $ | 2,097,808,769 | | | $ | 426,646,532 | | | $ | 212,291,135 | |
| Net unrealized appreciation (depreciation) | | | 116,938,946 | | | | (53,491,348 | ) | | | (4,624,866 | ) |
| Total investments, at market value | | | 2,214,747,715 | | | | 373,155,184 | | | | 207,666,269 | |
| Foreign Currency (Cost of $—, $200,740, $102,227, respectively) | | | — | | | | 199,732 | | | | 102,477 | |
| Deposit at broker – futures contracts (Note 7) | | | 3,586,723 | | | | — | | | | — | |
| Gross unrealized appreciation – futures contracts (Note 7) | | | — | | | | — | | | | — | |
| Gross unrealized appreciation – | | | | | | | | | | | | |
| forward foreign currency contracts (Note 6) | | | 148,008 | | | | — | | | | — | |
| Receivables: | | | | | | | | | | | | |
| Investment securities sold | | | 8,816,895 | | | | — | | | | 840,645 | |
| Fund shares sold | | | 10,897,758 | | | | 2,363,251 | | | | 1,537,510 | |
| Interest and dividends | | | 2,794,345 | | | | 1,260,518 | | | | 324,715 | |
| Prepaid expenses and other assets | | | 50,306 | | | | 120,554 | | | | 35,206 | |
| Total Assets | | | 2,241,041,750 | | | | 377,099,239 | | | | 210,506,822 | |
| LIABILITIES | | | | | | | | | | | | |
| Gross unrealized depreciation – futures contracts (Note 7) | | | 945,626 | | | | — | | | | — | |
| Gross unrealized depreciation – | | | | | | | | | | | | |
| forward foreign currency contracts (Note 6) | | | 16,164,509 | | | | — | | | | — | |
| Payables: | | | | | | | | | | | | |
| Investment securities purchased | | | 3,497,181 | | | | 23,648 | | | | 293,392 | |
| Fund shares redeemed | | | 15,664,270 | | | | 3,070,872 | | | | 2,479,507 | |
| Accrued Liabilities: | | | | | | | | | | | | |
| Investment advisory fees | | | 2,052,454 | | | | 285,439 | | | | 217,561 | |
| Administration, accounting, and transfer agent fees | | | 247,420 | | | | 47,058 | | | | 27,766 | |
| Custodian fees | | | 73,537 | | | | 139,679 | | | | 86,608 | |
| Service fees | | | 4,889 | | | | 21,493 | | | | 839 | |
| Business management fees | | | 102,623 | | | | 15,858 | | | | 8,702 | |
| Distribution fees | | | 1,224 | | | | 592 | | | | — | |
| Other liabilities | | | 157,736 | | | | 24,872 | | | | 11,116 | |
| Total Liabilities | | | 38,911,469 | | | | 3,629,511 | | | | 3,125,491 | |
| NET ASSETS | | $ | 2,202,130,281 | | | $ | 373,469,728 | | | $ | 207,381,331 | |
| COMPONENTS OF NET ASSETS | | | | | | | | | | | | |
| Paid-in capital | | $ | 2,235,522,767 | | | $ | 448,380,557 | | | $ | 223,371,680 | |
| Accumulated net investment income (loss) | | | (15,538,184 | ) | | | 495,987 | | | | (300,604 | ) |
| Accumulated net realized gain (loss) | | | (117,719,704 | ) | | | (21,898,927 | ) | | | (11,063,200 | ) |
| Unrealized appreciation (depreciation) on investments | | | 116,938,946 | | | | (53,491,348 | ) | | | (4,624,866 | ) |
| Unrealized depreciation – futures contracts (Note 7) | | | (945,626 | ) | | | — | | | | — | |
| Unrealized depreciation – forward foreign currency contracts (Note 6) | | | (16,016,501 | ) | | | — | | | | — | |
| Unrealized appreciation (depreciation) – foreign receivables | | | (111,417 | ) | | | (16,541 | ) | | | (1,679 | ) |
| NET ASSETS | | $ | 2,202,130,281 | | | $ | 373,469,728 | | | $ | 207,381,331 | |
| COMPUTATION OF NET ASSET VALUE | | | | | | | | | | | | |
| Institutional Shares: | | | | | | | | | | | | |
| Net assets | | $ | 2,165,448,796 | | | $ | 201,671,115 | | | $ | 200,613,599 | |
| Shares outstanding (unlimited shares authorized) | | | 199,111,255 | | | | 24,437,939 | | | | 20,605,303 | |
| Net asset value per share | | $ | 10.88 | | | $ | 8.25 | | | $ | 9.74 | |
| Investor Shares: | | | | | | | | | | | | |
| Net assets | | $ | 35,371,064 | | | $ | 171,424,913 | | | $ | 6,767,732 | |
| Shares outstanding (unlimited shares authorized) | | | 3,255,018 | | | | 20,804,804 | | | | 696,362 | |
| Net asset value per share | | $ | 10.87 | | | $ | 8.24 | | | $ | 9.72 | |
| Advisor Shares: | | | | | | | | | | | | |
| Net assets | | $ | 1,310,421 | | | $ | 373,700 | | | $ | — | |
| Shares outstanding (unlimited shares authorized) | | | 120,850 | | | | 45,182 | | | | — | |
| Net asset value per share | | $ | 10.84 | | | $ | 8.27 | | | $ | — | |
The accompanying notes are an integral part of these financial statements.
Statements of Operations
For the Six Months Ended December 31, 2015 (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 | | $ | 7,359,367 | | | $ | 1,737,804 | | | $ | 2,242,919 | | | $ | 3,137,222 | |
| Less: foreign taxes withheld | | | — | | | | (34,358 | ) | | | (26,613 | ) | | | (27,859 | ) |
| Interest Income | | | 17,175 | | | | 1,377 | | | | 3,698 | | | | 1,970 | |
| Total investment income | | | 7,376,542 | | | | 1,704,823 | | | | 2,220,004 | | | | 3,111,333 | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 7,285,638 | | | | 444,883 | | | | 876,760 | | | | 564,743 | |
| Service fees | | | 1,626,303 | | | | 111,211 | | | | 214,159 | | | | 127,663 | |
| Business management fees | | | 607,137 | | | | 37,074 | | | | 73,063 | | | | 47,062 | |
| Administration, accounting, and transfer agent fees | | | 456,568 | | | | 29,863 | | | | 56,518 | | | | 37,681 | |
| Miscellaneous expenses | | | 114,877 | | | | 7,148 | | | | 12,701 | | | | 9,577 | |
| Professional fees | | | 69,225 | | | | 13,354 | | | | 16,405 | | | | 14,198 | |
| Trustee fees and expenses | | | 54,039 | | | | 3,492 | | | | 6,392 | | | | 4,385 | |
| Distribution fees | | | 50,727 | | | | 1,388 | | | | 13,597 | | | | 3,754 | |
| Custodian fees | | | 38,617 | | | | 4,909 | | | | 7,151 | | | | 3,307 | |
| Registration fees | | | 35,134 | | | | 21,445 | | | | 27,059 | | | | 21,892 | |
| Insurance fees | | | 22,772 | | | | 1,575 | | | | 2,613 | | | | 1,892 | |
| Interest expense | | | — | | | | 80 | | | | — | | | | — | |
| Total Expenses | | | 10,361,037 | | | | 676,422 | | | | 1,306,418 | | | | 836,154 | |
| NET INVESTMENT INCOME (LOSS) | | | (2,984,495 | ) | | | 1,028,401 | | | | 913,586 | | | | 2,275,179 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | | | |
| Net realized gain (loss) on investments | | | 54,149,797 | | | | (6,717,199 | ) | | | (6,891,575 | ) | | | (1,892,181 | ) |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
| Investments | | | (3,989,163 | ) | | | (8,006,352 | ) | | | (916,226 | ) | | | (8,495,016 | ) |
| Foreign receivables | | | — | | | | — | | | | 440 | | | | — | |
| Net change in unrealized appreciation (depreciation) | | | (3,989,163 | ) | | | (8,006,352 | ) | | | (915,786 | ) | | | (8,495,016 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 50,160,634 | | | | (14,723,551 | ) | | | (7,807,361 | ) | | | (10,387,197 | ) |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | 47,176,139 | | | $ | (13,695,150 | ) | | $ | (6,893,775 | ) | | $ | (8,112,018 | ) |
The accompanying notes are an integral part of these financial statements.
Statements of Operations
For the Six Months Ended December 31, 2015 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY | |
| | | SUSTAINABLE | | | SMALL-CAP | | | SMALL-CAP | | | MULTI- | |
| | | GROWTH | | | GROWTH | | | FUNDAMENTAL | | | STRATEGY | |
| | | FUND | | | FUND | | | VALUE FUND | | | FUND | |
| INVESTMENT INCOME | | | | | | | | | | | | |
| Dividend income – unaffiliated | | $ | 849,762 | | | $ | 732,893 | | | $ | 6,931,500 | | | $ | — | |
| Dividend income – affiliated (Note 3) | | | — | | | | — | | | | — | | | | 30,856 | |
| Less: foreign taxes withheld | | | (9,668 | ) | | | (6,338 | ) | | | — | | | | — | |
| Interest Income | | | 2,874 | | | | 3,879 | | | | 7,358 | | | | 23 | |
| Total investment income | | | 842,968 | | | | 730,434 | | | | 6,938,858 | | | | 30,879 | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 798,278 | | | | 1,177,422 | | | | 3,659,095 | | | | 4,213 | |
| Distribution fees | | | 222,646 | | | | 7,264 | | | | 69,122 | | | | — | |
| Service fees | | | 143,971 | | | | 198,329 | | | | 582,059 | | | | — | |
| Business management fees | | | 66,523 | | | | 69,260 | | | | 215,241 | | | | 702 | |
| Administration, accounting, and transfer agent fees | | | 50,436 | | | | 52,804 | | | | 172,586 | | | | 573 | |
| Registration fees | | | 29,947 | | | | 25,377 | | | | 49,982 | | | | 11,678 | |
| Professional fees | | | 15,473 | | | | 16,263 | | | | 30,921 | | | | 9,366 | |
| Miscellaneous expenses | | | 6,810 | | | | 12,081 | | | | 42,219 | | | | 1,898 | |
| Trustee fees and expenses | | | 5,426 | | | | 6,219 | | | | 19,428 | | | | 60 | |
| Custodian fees | | | 3,941 | | | | 5,591 | | | | 18,260 | | | | 998 | |
| Insurance fees | | | 2,006 | | | | 2,609 | | | | 8,122 | | | | 11 | |
| Total Expenses | | | 1,345,457 | | | | 1,573,219 | | | | 4,867,035 | | | | 29,499 | |
| Expenses waived by adviser – expense cap (Note 3) | | | — | | | | — | | | | — | | | | (14,051 | ) |
| Net Expenses | | | 1,345,457 | | | | 1,573,219 | | | | 4,867,035 | | | | 15,448 | |
| NET INVESTMENT INCOME (LOSS) | | | (502,489 | ) | | | (842,785 | ) | | | 2,071,823 | | | | 15,431 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | |
| Investments – unaffiliated | | | 4,646,131 | | | | 20,231,302 | | | | 4,923,914 | | | | — | |
| Investments – affiliated (Note 3) | | | — | | | | — | | | | — | | | | — | |
| Capital gain distribution from other RIC – affiliated (Note 3) | | | — | | | | — | | | | — | | | | 26,365 | |
| Net realized gain (loss) | | | 4,646,131 | | | | 20,231,302 | | | | 4,923,914 | | | | 26,365 | |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
| Investments – unaffiliated | | | 7,645,252 | | | | (22,743,812 | ) | | | (57,815,105 | ) | | | — | |
| Investments – affiliated (Note 3) | | | — | | | | — | | | | — | | | | (129,510 | ) |
| Foreign receivables | | | 205 | | | | — | | | | — | | | | — | |
| Net change in unrealized appreciation (depreciation) | | | 7,645,457 | | | | (22,743,812 | ) | | | (57,815,105 | ) | | | (129,510 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 12,291,588 | | | | (2,512,510 | ) | | | (52,891,191 | ) | | | (103,145 | ) |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | 11,789,099 | | | $ | (3,355,295 | ) | | $ | (50,819,368 | ) | | $ | (87,714 | ) |
The accompanying notes are an integral part of these financial statements.
Statements of Operations
For the Period / Six Months Ended December 31, 2015 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY | |
| | | GLOBAL | | | INTERMEDIATE | | | TOTAL | | | STRATEGIC | |
| | | LEADERS | | | INCOME | | | RETURN | | | BOND | |
| | | FUND* | | | FUND | | | FUND | | | FUND | |
| INVESTMENT INCOME | | | | | | | | | | | | |
| Dividend income – unaffiliated | | $ | 34,149 | | | $ | — | | | $ | 7,445 | | | $ | 35,182 | |
| Dividend income – affiliated (Note 3) | | | — | | | | 448,348 | | | | — | | | | — | |
| Less: foreign taxes withheld | | | (1,495 | ) | | | — | | | | — | | | | — | |
| Interest Income | | | 174 | | | | 1,395,052 | | | | 1,280,607 | | | | 1,089,138 | |
| Total investment income | | | 32,828 | | | | 1,843,400 | | | | 1,288,052 | | | | 1,124,320 | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 21,356 | | | | 229,918 | | | | 121,729 | | | | 106,732 | |
| Custodian fees | | | 18,300 | | | | 3,248 | | | | 3,313 | | | | 1,387 | |
| Registration fees | | | 9,516 | | | | 19,111 | | | | 17,991 | | | | 19,909 | |
| Professional fees | | | 9,242 | | | | 13,259 | | | | 11,438 | | | | 10,750 | |
| Service fees | | | 4,928 | | | | 38,320 | | | | 1,468 | | | | 13,342 | |
| Miscellaneous expenses | | | 2,395 | | | | 8,477 | | | | 7,284 | | | | 7,425 | |
| Business management fees | | | 1,643 | | | | 38,320 | | | | 20,288 | | | | 13,342 | |
| Administration, accounting, and transfer agent fees | | | 1,449 | | | | 35,295 | | | | 22,072 | | | | 17,291 | |
| Insurance fees | | | 183 | | | | 1,400 | | | | 800 | | | | 561 | |
| Trustee fees and expenses | | | 92 | | | | 3,449 | | | | 1,839 | | | | 1,253 | |
| Distribution fees | | | — | | | | 11,771 | | | | — | | | | 1,849 | |
| Interest expense | | | — | | | | — | | | | — | | | | 299 | |
| Total Expenses | | | 69,104 | | | | 402,568 | | | | 208,222 | | | | 194,140 | |
| Expenses waived by adviser – expense cap (Note 3) | | | (41,178 | ) | | | — | | | | — | | | | (5,510 | ) |
| Expenses waived by adviser – investments in affiliates (Note 3) | | | — | | | | (53,415 | ) | | | — | | | | — | |
| Net Expenses | | | 27,926 | | | | 349,153 | | | | 208,222 | | | | 188,630 | |
| NET INVESTMENT INCOME (LOSS) | | | 4,902 | | | | 1,494,247 | | | | 1,079,830 | | | | 935,690 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | |
| Investments – unaffiliated | | | (596,945 | ) | | | (829,084 | ) | | | (363,687 | ) | | | (1,759,661 | ) |
| Investments – affiliated (Note 3) | | | — | | | | — | | | | — | | | | — | |
| Futures contracts (Note 7) | | | — | | | | — | | | | 60,669 | | | | 54,590 | |
| Capital gain distribution from other RIC – affiliated (Note 3) | | | — | | | | 139,069 | | | | — | | | | — | |
| Net realized gain (loss) | | | (596,945 | ) | | | (690,015 | ) | | | (303,018 | ) | | | (1,705,071 | ) |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
| Investments – unaffiliated | | | 515,491 | | | | 143,067 | | | | (350,438 | ) | | | 73,729 | |
| Investments – affiliated (Note 3) | | | — | | | | (251,982 | ) | | | — | | | | | |
| Foreign receivables | | | (141 | ) | | | — | | | | — | | | | — | |
| Futures contracts (Note 7) | | | — | | | | — | | | | 237,028 | | | | 43,112 | |
| Net change in unrealized appreciation (depreciation) | | | 515,350 | | | | (108,915 | ) | | | (113,410 | ) | | | 116,841 | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | (81,595 | ) | | | (798,930 | ) | | | (416,428 | ) | | | (1,588,230 | ) |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | (76,693 | ) | | $ | 695,317 | | | $ | 663,402 | | | $ | (652,540 | ) |
| * | Commenced operations on July 1, 2015. Information presented is for the period from July 1, 2015 (end of day) to December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Statements of Operations
For the Six Months Ended December 31, 2015 (Unaudited)
| | | BROWN | | | BROWN | | | BROWN | | | BROWN | |
| | | ADVISORY | | | ADVISORY | | | ADVISORY | | | ADVISORY – | |
| | | MARYLAND | | | TAX EXEMPT | | | MORTGAGE | | | WMC STRATEGIC | |
| | | BOND | | | BOND | | | SECURITIES | | | EUROPEAN | |
| | | FUND | | | FUND | | | FUND | | | EQUITY FUND | |
| INVESTMENT INCOME | | | | | | | | | | | | |
| Dividend income | | $ | — | | | $ | — | | | $ | — | | | $ | 4,345,213 | |
| Less: foreign taxes withheld | | | — | | | | — | | | | — | | | | (473,247 | ) |
| Interest Income | | | 2,443,972 | | | | 3,074,549 | | | | 3,530,641 | | | | 4,519 | |
| Total investment income | | | 2,443,972 | | | | 3,074,549 | | | | 3,530,641 | | | | 3,876,485 | |
| EXPENSES | | | | | | | | | | | | | | | | |
| Investment advisory fees | | | 293,992 | | | | 337,769 | | | | 404,026 | | | | 3,954,624 | |
| Administration, accounting, and transfer agent fees | | | 51,803 | | | | 55,877 | | | | 74,573 | | | | 172,108 | |
| Service fees | | | 48,999 | | | | 56,295 | | | | 5,737 | | | | 18,309 | |
| Business management fees | | | 48,999 | | | | 56,295 | | | | 67,338 | | | | 219,701 | |
| Professional fees | | | 14,427 | | | | 15,147 | | | | 15,564 | | | | 31,555 | |
| Miscellaneous expenses | | | 9,260 | | | | 11,050 | | | | 8,831 | | | | 59,362 | |
| Trustee fees and expenses | | | 4,482 | | | | 5,179 | | | | 5,730 | | | | 19,778 | |
| Registration fees | | | 3,803 | | | | 13,059 | | | | 18,903 | | | | 92,584 | |
| Custodian fees | | | 3,390 | | | | 3,911 | | | | 7,646 | | | | 149,685 | |
| Insurance fees | | | 1,854 | | | | 2,076 | | | | 756 | | | | 2,467 | |
| Distribution fees | | | — | | | | — | | | | — | | | | 1,208 | |
| Total Expenses | | | 481,009 | | | | 556,658 | | | | 609,104 | | | | 4,721,381 | |
| NET INVESTMENT INCOME (LOSS) | | | 1,962,963 | | | | 2,517,891 | | | | 2,921,537 | | | | (844,896 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | | | | | | | | | |
| Investments | | | 944,810 | | | | (669,269 | ) | | | 54,357 | | | | (6,983,720 | ) |
| Futures contracts (Note 7) | | | — | | | | — | | | | — | | | | (1,711,587 | ) |
| Forward foreign currency contracts (Note 6) | | | — | | | | — | | | | — | | | | (82,499 | ) |
| Net realized gain (loss) | | | 944,810 | | | | (669,269 | ) | | | 54,357 | | | | (8,777,806 | ) |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | | | | | |
| Investments | | | 1,034,514 | | | | 2,865,992 | | | | (897,605 | ) | | | (3,573,099 | ) |
| Foreign receivables | | | — | | | | — | | | | — | | | | (11,628 | ) |
| Net change in unrealized appreciation (depreciation) | | | 1,034,514 | | | | 2,865,992 | | | | (897,605 | ) | | | (3,584,727 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,979,324 | | | | 2,196,723 | | | | (843,248 | ) | | | (12,362,533 | ) |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | 3,942,287 | | | $ | 4,714,614 | | | $ | 2,078,289 | | | $ | (13,207,429 | ) |
The accompanying notes are an integral part of these financial statements.
Statements of Operations
For the Six Months Ended December 31, 2015 (Unaudited)
| | | BROWN ADVISORY – | | | | | | | |
| | | WMC JAPAN ALPHA | | | BROWN ADVISORY – | | | BROWN ADVISORY | |
| | | OPPORTUNITIES | | | SOMSERSET EMERGING | | | EMERGING MARKETS | |
| | | FUND | | | MARKETS FUND | | | SMALL-CAP FUND | |
| INVESTMENT INCOME | | | | | | | | | |
| Dividend income | | $ | 16,841,023 | | | $ | 4,858,839 | | | $ | 1,465,655 | |
| Less: foreign taxes withheld | | | (1,684,102 | ) | | | (708,381 | ) | | | (173,216 | ) |
| Interest Income | | | 43,119 | | | | 6,694 | | | | 3,180 | |
| Total investment income | | | 15,200,040 | | | | 4,157,152 | | | | 1,295,619 | |
| EXPENSES | | | | | | | | | | | | |
| Investment advisory fees | | | 11,288,038 | | | | 1,754,012 | | | | 1,295,049 | |
| Business management fees | | | 564,402 | | | | 97,445 | | | | 51,802 | |
| Administration, accounting, and transfer agent fees | | | 430,124 | | | | 80,740 | | | | 45,688 | |
| Custodian fees | | | 202,274 | | | | 285,165 | | | | 138,523 | |
| Miscellaneous expenses | | | 134,910 | | | | 27,339 | | | | 11,800 | |
| Registration fees | | | 61,198 | | | | 42,237 | | | | 22,903 | |
| Professional fees | | | 65,539 | | | | 19,665 | | | | 14,392 | |
| Trustee fees and expenses | | | 50,715 | | | | 9,223 | | | | 1,992 | |
| Service fees | | | 25,029 | | | | 118,552 | | | | 12,079 | |
| Insurance fees | | | 15,014 | | | | 3,888 | | | | 1,995 | |
| Distribution fees | | | 2,296 | | | | 1,138 | | | | — | |
| Total Expenses | | | 12,839,539 | | | | 2,439,404 | | | | 1,596,223 | |
| NET INVESTMENT INCOME (LOSS) | | | 2,360,501 | | | | 1,717,748 | | | | (300,604 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | | | | | | | | | | |
| Net realized gain (loss) on: | | | | | | | | | | | | |
| Investments | | | (41,390,879 | ) | | | (14,247,679 | ) | | | (10,633,919 | ) |
| Futures contracts (Note 7) | | | (9,799,451 | ) | | | — | | | | — | |
| Forward foreign currency contracts (Note 6) | | | (58,604,892 | ) | | | — | | | | — | |
| Net realized gain (loss) | | | (109,795,222 | ) | | | (14,247,679 | ) | | | (10,633,919 | ) |
| Net change in unrealized appreciation (depreciation) on: | | | | | | | | | | | | |
| Investments | | | (43,640,344 | ) | | | (50,834,228 | ) | | | (18,451,434 | ) |
| Futures contracts (Note 7) | | | 336,271 | | | | — | | | | — | |
| Forward foreign currency contracts (Note 6) | | | 3,042,666 | | | | — | | | | — | |
| Foreign receivables | | | (36,880 | ) | | | 8,727 | | | | (2,822 | ) |
| Net change in unrealized appreciation (depreciation) | | | (40,298,287 | ) | | | (50,825,501 | ) | | | (18,454,256 | ) |
| NET REALIZED AND UNREALIZED GAIN (LOSS) | | | (150,093,509 | ) | | | (65,073,180 | ) | | | (29,088,175 | ) |
| INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | $ | (147,733,008 | ) | | $ | (63,355,432 | ) | | $ | (29,388,779 | ) |
The accompanying notes are an integral part of these financial statements.
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 | |
| | | 2015 | | | June 30, | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | (Unaudited) | | | 2015 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income (loss) | | $ | (2,984,495 | ) | | $ | (1,287,032 | ) | | $ | 1,028,401 | | | $ | 2,873,324 | |
| Net realized gains (losses) | | | 54,149,797 | | | | 142,498,453 | | | | (6,717,199 | ) | | | 20,505,998 | |
| Net change in unrealized appreciation (depreciation) | | | (3,989,163 | ) | | | 95,329,685 | | | | (8,006,352 | ) | | | (28,872,930 | ) |
| Increase (Decrease) in Net Assets from Operations | | | 47,176,139 | | | | 236,541,106 | | | | (13,695,150 | ) | | | (5,493,608 | ) |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | (212 | ) | | | (835 | ) |
| Investor Shares | | | — | | | | — | | | | (1,748,361 | ) | | | (3,161,833 | ) |
| Advisor Shares | | | — | | | | — | | | | (12,194 | ) | | | (16,853 | ) |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (16,080,264 | ) | | | (7,762,347 | ) | | | (1,575 | ) | | | (1,614 | ) |
| Investor Shares | | | (130,457,400 | ) | | | (69,561,007 | ) | | | (15,946,009 | ) | | | (6,779,611 | ) |
| Advisor Shares | | | (2,441,644 | ) | | | (1,508,212 | ) | | | (129,102 | ) | | | (45,355 | ) |
| Total Distributions to Shareholders | | | (148,979,308 | ) | | | (78,831,566 | ) | | | (17,837,453 | ) | | | (10,006,101 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 17,693,219 | | | | 67,603,650 | | | | — | | | | 43,422 | |
| Investor Shares | | | 138,836,472 | | | | 259,807,081 | | | | 1,443,413 | | | | 13,675,935 | |
| Advisor Shares | | | 2,212,550 | | | | 3,854,264 | | | | — | | | | 58,887 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 13,324,394 | | | | 7,222,086 | | | | 1,574 | | | | 1,614 | |
| Investor Shares | | | 117,886,619 | | | | 62,066,866 | | | | 8,194,017 | | | | 4,242,468 | |
| Advisor Shares | | | 2,377,708 | | | | 1,473,353 | | | | 109,569 | | | | 51,115 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (20,997,133 | ) | | | (65,507,889 | ) | | | — | | | | (40,675 | ) |
| Investor Shares | | | (233,537,729 | ) | | | (814,445,647 | ) | | | (26,772,713 | ) | | | (77,385,552 | ) |
| Advisor Shares | | | (9,334,244 | ) | | | (12,071,342 | ) | | | (19,818 | ) | | | (457,798 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | 139 | | | | — | | | | — | |
| Investor Shares | | | 235 | | | | 2,014 | | | | — | | | | — | |
| Advisor Shares | | | 7 | | | | 47 | | | | — | | | | 106 | |
| Increase (Decrease) from Capital Share Transactions | | | 28,462,098 | | | | (489,995,378 | ) | | | (17,043,958 | ) | | | (59,810,478 | ) |
| Increase (Decrease) in Net Assets | | | (73,341,071 | ) | | | (332,285,838 | ) | | | (48,576,561 | ) | | | (75,310,187 | ) |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year / period | | | 2,447,009,716 | | | | 2,779,295,554 | | | | 168,005,496 | | | | 243,315,683 | |
| End of year / period | | $ | 2,373,668,645 | | | $ | 2,447,009,716 | | | $ | 119,428,935 | | | $ | 168,005,496 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (2,984,495 | ) | | $ | — | | | $ | 1,028,356 | | | $ | 1,760,722 | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 855,467 | | | | 3,477,138 | | | | — | | | | 2,358 | |
| Investor Shares | | | 6,866,043 | | | | 13,244,976 | | | | 88,000 | | | | 751,004 | |
| Advisor Shares | | | 112,603 | | | | 204,051 | | | | — | | | | 3,309 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 691,458 | | | | 369,039 | | | | 113 | | | | 91 | |
| Investor Shares | | | 6,143,128 | | | | 3,179,655 | | | | 587,890 | | | | 240,913 | |
| Advisor Shares | | | 128,525 | | | | 77,914 | | | | 7,810 | | | | 2,883 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (1,014,916 | ) | | | (3,331,028 | ) | | | — | | | | (2,425 | ) |
| Investor Shares | | | (11,584,453 | ) | | | (41,587,352 | ) | | | (1,681,703 | ) | | | (4,361,257 | ) |
| Advisor Shares | | | (474,657 | ) | | | (634,323 | ) | | | (1,198 | ) | | | (25,841 | ) |
| Increase (Decrease) from Share Transactions | | | 1,723,198 | | | | (24,999,930 | ) | | | (999,088 | ) | | | (3,388,965 | ) |
The accompanying notes are an integral part of these financial statements.
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 | |
| | | 2015 | | | June 30, | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | (Unaudited) | | | 2015 | |
| OPERATIONS | | | | �� | | | | | | | | |
| Net investment income | | $ | 913,586 | | | $ | 1,422,084 | | | $ | 2,275,179 | | | $ | 4,175,538 | |
| Net realized gains (losses) | | | (6,891,575 | ) | | | 2,577,056 | | | | (1,892,181 | ) | | | 4,209,370 | |
| Net change in unrealized appreciation (depreciation) | | | (915,786 | ) | | | 11,769,398 | | | | (8,495,016 | ) | | | (3,425,774 | ) |
| Increase (Decrease) in Net Assets from Operations | | | (6,893,775 | ) | | | 15,768,538 | | | | (8,112,018 | ) | | | 4,959,134 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (118,078 | ) | | | (672 | ) | | | (253,190 | ) | | | (393,937 | ) |
| Investor Shares | | | (1,585,339 | ) | | | (980,117 | ) | | | (2,064,407 | ) | | | (3,734,830 | ) |
| Advisor Shares | | | (24,797 | ) | | | (20,673 | ) | | | (34,736 | ) | | | (56,365 | ) |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | (188,209 | ) | | | (823,551 | ) |
| Investor Shares | | | — | | | | — | | | | (1,567,845 | ) | | | (8,462,343 | ) |
| Advisor Shares | | | — | | | | — | | | | (29,616 | ) | | | (144,101 | ) |
| Total Distributions to Shareholders | | | (1,728,214 | ) | | | (1,001,462 | ) | | | (4,138,003 | ) | | | (13,615,127 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 13,555,852 | | | | 4,491,198 | | | | 535,000 | | | | 425,083 | |
| Investor Shares | | | 54,284,965 | | | | 126,514,218 | | | | 5,103,522 | | | | 24,779,203 | |
| Advisor Shares | | | 693,592 | | | | 4,346,413 | | | | — | | | | 232,804 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 7 | | | | — | | | | 370,694 | | | | 1,111,862 | |
| Investor Shares | | | 528,062 | | | | 371,990 | | | | 1,222,622 | | | | 5,450,611 | |
| Advisor Shares | | | 22,944 | | | | 19,373 | | | | 56,758 | | | | 184,935 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (53,400 | ) | | | (3,560,985 | ) | | | — | | | | (307,761 | ) |
| Investor Shares | | | (40,207,952 | ) | | | (34,603,086 | ) | | | (35,624,537 | ) | | | (19,832,624 | ) |
| Advisor Shares | | | (1,800,782 | ) | | | (8,570,686 | ) | | | (247,573 | ) | | | (437,250 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | — | | | | — | |
| Investor Shares | | | 62 | | | | 852 | | | | — | | | | — | |
| Advisor Shares | | | 2 | | | | — | | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 27,023,352 | | | | 89,009,287 | | | | (28,583,514 | ) | | | 11,606,863 | |
| Increase (Decrease) in Net Assets | | | 18,401,363 | | | | 103,776,363 | | | | (40,833,535 | ) | | | 2,950,870 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year / period | | | 284,348,621 | | | | 180,572,258 | | | | 204,283,360 | | | | 201,332,490 | |
| End of year / period | | $ | 302,749,984 | | | $ | 284,348,621 | | | $ | 163,449,825 | | | $ | 204,283,360 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | 11,577 | | | $ | 826,205 | | | $ | (77,154 | ) | | $ | — | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 855,046 | | | | 286,808 | | | | 43,640 | | | | 31,623 | |
| Investor Shares | | | 3,502,340 | | | | 8,056,850 | | | | 403,048 | | | | 1,827,033 | |
| Advisor Shares | | | 44,899 | | | | 276,507 | | | | — | | | | 17,249 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | 30,186 | | | | 82,255 | |
| Investor Shares | | | 33,721 | | | | 23,062 | | | | 99,872 | | | | 403,046 | |
| Advisor Shares | | | 1,464 | | | | 1,201 | | | | 4,633 | | | | 13,700 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (3,537 | ) | | | (231,546 | ) | | | — | | | | (22,576 | ) |
| Investor Shares | | | (2,567,867 | ) | | | (2,175,833 | ) | | | (2,824,415 | ) | | | (1,463,547 | ) |
| Advisor Shares | | | (115,748 | ) | | | (555,109 | ) | | | (19,801 | ) | | | (32,018 | ) |
| Increase (Decrease) from Share Transactions | | | 1,750,318 | | | | 5,681,940 | | | | (2,262,837 | ) | | | 856,765 | |
The accompanying notes are an integral part of these financial statements.
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 | |
| | | 2015 | | | June 30, | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | (Unaudited) | | | 2015 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment loss | | $ | (502,489 | ) | | $ | (817,352 | ) | | $ | (842,785 | ) | | $ | (1,823,234 | ) |
| Net realized gains | | | 4,646,131 | | | | 17,678,513 | | | | 20,231,302 | | | | 38,675,691 | |
| Net change in unrealized appreciation (depreciation) | | | 7,645,457 | | | | 9,157,231 | | | | (22,743,812 | ) | | | (4,311,804 | ) |
| Increase (Decrease) in Net Assets from Operations | | | 11,789,099 | | | | 26,018,392 | | | | (3,355,295 | ) | | | 32,540,653 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (3,716,752 | ) | | | (655,994 | ) | | | (1,946,062 | ) | | | (978,695 | ) |
| Investor Shares | | | (732,739 | ) | | | (998,289 | ) | | | (37,656,440 | ) | | | (30,219,392 | ) |
| Advisor Shares | | | (9,527,397 | ) | | | (2,685,927 | ) | | | (819,957 | ) | | | (686,814 | ) |
| Total Distributions to Shareholders | | | (13,976,888 | ) | | | (4,340,210 | ) | | | (40,422,459 | ) | | | (31,884,901 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 18,041,205 | | | | 43,518,158 | | | | 1,254,341 | | | | 5,495,343 | |
| Investor Shares | | | 10,668,881 | | | | 6,918,710 | | | | 18,134,217 | | | | 18,679,499 | |
| Advisor Shares | | | 78,844,528 | | | | 10,366,384 | | | | 1,399,494 | | | | 1,729,263 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 2,354,247 | | | | 523,469 | | | | 1,258,905 | | | | 867,109 | |
| Investor Shares | | | 538,649 | | | | 577,035 | | | | 22,013,906 | | | | 17,079,397 | |
| Advisor Shares | | | 8,931,713 | | | | 2,496,115 | | | | 565,945 | | | | 522,789 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (5,709,340 | ) | | | (9,300,080 | ) | | | (397,874 | ) | | | (2,442,148 | ) |
| Investor Shares | | | (4,801,923 | ) | | | (48,880,467 | ) | | | (13,757,998 | ) | | | (58,853,998 | ) |
| Advisor Shares | | | (13,536,164 | ) | | | (21,536,336 | ) | | | (1,481,347 | ) | | | (3,203,139 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | — | | | | — | |
| Investor Shares | | | — | | | | 59 | | | | — | | | | 233 | |
| Advisor Shares | | | 217 | | | | 463 | | | | 189 | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 95,332,013 | | | | (15,316,490 | ) | | | 28,989,778 | | | | (20,125,652 | ) |
| Increase (Decrease) in Net Assets | | | 93,144,224 | | | | 6,361,692 | | | | (14,787,976 | ) | | | (19,469,900 | ) |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year / period | | | 216,404,634 | | | | 210,042,942 | | | | 281,614,456 | | | | 301,084,356 | |
| End of year / period | | $ | 309,548,858 | | | $ | 216,404,634 | | | $ | 266,826,480 | | | $ | 281,614,456 | |
| Accumulated net investment loss | | $ | (932,263 | ) | | $ | (429,774 | ) | | $ | (1,379,397 | ) | | $ | (536,612 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,104,447 | | | | 2,737,848 | | | | 35,812 | | | | 164,079 | |
| Investor Shares | | | 658,202 | | | | 469,873 | | | | 1,076,033 | | | | 1,066,313 | |
| Advisor Shares | | | 4,916,424 | | | | 675,203 | | | | 88,334 | | | | 102,159 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 150,527 | | | | 35,538 | | | | 41,977 | | | | 26,324 | |
| Investor Shares | | | 34,640 | | | | 39,334 | | | | 1,461,747 | | | | 1,031,365 | |
| Advisor Shares | | | 579,605 | | | | 171,201 | | | | 39,112 | | | | 32,776 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (357,025 | ) | | | (605,631 | ) | | | (11,285 | ) | | | (69,833 | ) |
| Investor Shares | | | (293,845 | ) | | | (3,121,284 | ) | | | (811,805 | ) | | | (3,366,097 | ) |
| Advisor Shares | | | (845,696 | ) | | | (1,472,472 | ) | | | (91,693 | ) | | | (188,820 | ) |
| Increase (Decrease) from Share Transactions | | | 5,947,279 | | | | (1,070,390 | ) | | | 1,828,232 | | | | (1,201,734 | ) |
The accompanying notes are an integral part of these financial statements.
Statements of Changes in Net Assets
| | | BROWN ADVISORY SMALL-CAP | | | BROWN ADVISORY | |
| | | FUNDAMENTAL VALUE FUND | | | MULTI-STRATEGY FUND | |
| | | Six Months Ended | | | | | | Six Months Ended | | | | |
| | | December 31, | | | Year Ended | | | December 31, | | | Period Ended | |
| | | 2015 | | | June 30, | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | (Unaudited) | | | | 2015 | * |
| OPERATIONS | | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 2,071,823 | | | $ | 1,918,449 | | | $ | 15,431 | | | $ | (8,431 | ) |
| Net realized gains | | | 4,923,914 | | | | 32,140,185 | | | | 26,365 | | | | 2,407 | |
| Net change in unrealized appreciation (depreciation) | | | (57,815,105 | ) | | | (8,864,807 | ) | | | (129,510 | ) | | | 31,763 | |
| Increase (Decrease) in Net Assets from Operations | | | (50,819,368 | ) | | | 25,193,827 | | | | (87,714 | ) | | | 25,739 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (484,047 | ) | | | (194,841 | ) | | | (10,556 | ) | | | (2,394 | ) |
| Investor Shares | | | (2,277,048 | ) | | | (2,670,756 | ) | | | — | | | | — | |
| Advisor Shares | | | (35,541 | ) | | | (125,977 | ) | | | — | | | | — | |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (2,038,801 | ) | | | (1,600,207 | ) | | | (21,323 | ) | | | — | |
| Investor Shares | | | (14,082,090 | ) | | | (28,747,296 | ) | | | — | | | | — | |
| Advisor Shares | | | (1,069,410 | ) | | | (1,814,795 | ) | | | — | | | | — | |
| Total Distributions to Shareholders | | | (19,986,937 | ) | | | (35,153,872 | ) | | | (31,879 | ) | | | (2,394 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 39,573,986 | | | | 59,718,016 | | | | 745,995 | | | | 3,213,113 | |
| Investor Shares | | | 79,302,959 | | | | 268,908,004 | | | | — | | | | — | |
| Advisor Shares | | | 4,920,351 | | | | 45,406,706 | | | | — | | | | — | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,826,895 | | | | 1,724,030 | | | | 15,316 | | | | 1,862 | |
| Investor Shares | | | 9,736,248 | | | | 17,869,434 | | | | — | | | | — | |
| Advisor Shares | | | 1,084,680 | | | | 1,911,251 | | | | — | | | | — | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (5,412,518 | ) | | | (4,249,966 | ) | | | (9,534 | ) | | | (919,098 | ) |
| Investor Shares | | | (90,523,511 | ) | | | (97,894,196 | ) | | | — | | | | — | |
| Advisor Shares | | | (7,805,269 | ) | | | (9,586,430 | ) | | | — | | | | — | |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 101 | | | | 15 | | | | — | | | | — | |
| Investor Shares | | | 966 | | | | 1,692 | | | | — | | | | — | |
| Advisor Shares | | | 140 | | | | 1,622 | | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 32,705,028 | | | | 283,810,178 | | | | 751,777 | | | | 2,295,877 | |
| Increase (Decrease) in Net Assets | | | (38,101,277 | ) | | | 273,850,133 | | | | 632,184 | | | | 2,319,222 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year / period | | | 882,580,368 | | | | 608,730,235 | | | | 2,319,222 | | | | — | |
| End of year / period | | $ | 844,479,091 | | | $ | 882,580,368 | | | $ | 2,951,406 | | | $ | 2,319,222 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (724,813 | ) | | $ | — | | | $ | (5,362 | ) | | $ | (10,237 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,741,988 | | | | 2,510,304 | | | | 73,925 | | | | 320,283 | |
| Investor Shares | | | 3,506,368 | | | | 11,368,688 | | | | — | | | | — | |
| Advisor Shares | | | 215,435 | | | | 1,923,210 | | | | — | | | | — | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 83,740 | | | | 73,145 | | | | 1,579 | | | | 185 | |
| Investor Shares | | | 447,800 | | | | 758,465 | | | | — | | | | — | |
| Advisor Shares | | | 50,227 | | | | 81,364 | | | | — | | | | — | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (239,635 | ) | | | (179,005 | ) | | | (966 | ) | | | (90,196 | ) |
| Investor Shares | | | (4,008,104 | ) | | | (4,131,656 | ) | | | — | | | | — | |
| Advisor Shares | | | (346,903 | ) | | | (406,882 | ) | | | — | | | | — | |
| Increase (Decrease) from Share Transactions | | | 1,450,916 | | | | 11,997,633 | | | | 74,538 | | | | 230,272 | |
| * | Commenced operations on October 31, 2014. The information presented is for the period from October 31, 2014 to June 30, 2015. |
The accompanying notes are an integral part of these financial statements.
Statements of Changes in Net Assets
| | | BROWN ADVISORY | | | BROWN ADVISORY | |
| | | GLOBAL LEADERS FUND | | | INTERMEDIATE INCOME FUND | |
| | | Period Ended | | | Six Months Ended | | | | |
| | | December 31, | | | December 31, | | | Year Ended | |
| | | 2015* | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | (Unaudited) | | | 2015 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 4,902 | | | $ | 1,494,247 | | | $ | 3,167,470 | |
| Net realized gains | | | (596,945 | ) | | | (690,015 | ) | | | 1,131,585 | |
| Net change in unrealized appreciation (depreciation) | | | 515,350 | | | | (108,915 | ) | | | (2,404,862 | ) |
| Increase (Decrease) in Net Assets from Operations | | | (76,693 | ) | | | 695,317 | | | | 1,894,193 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | |
| Investor Shares | | | — | | | | (1,448,131 | ) | | | (3,342,529 | ) |
| Advisor Shares | | | — | | | | (83,923 | ) | | | (190,222 | ) |
| Net realized gain: | | | | | | | | | | | | |
| Investor Shares | | | — | | | | (773,068 | ) | | | — | |
| Advisor Shares | | | — | | | | (49,906 | ) | | | — | |
| Total Distributions to Shareholders | | | — | | | | (2,355,028 | ) | | | (3,532,751 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | |
| Investor Shares | | | 9,520,363 | | | | 17,294,823 | | | | 29,017,096 | |
| Advisor Shares | | | — | | | | 6,918 | | | | 29,024 | |
| Reinvestment of distributions: | | | | | | | | | | | | |
| Investor Shares | | | — | | | | 926,461 | | | | 742,197 | |
| Advisor Shares | | | — | | | | 85,885 | | | | 117,261 | |
| Redemption of shares: | | | | | | | | | | | | |
| Investor Shares | | | (430,766 | ) | | | (15,093,447 | ) | | | (95,596,082 | ) |
| Advisor Shares | | | — | | | | (503,235 | ) | | | (3,041,900 | ) |
| Redemption fees: | | | | | | | | | | | | |
| Investor Shares | | | — | | | | 3 | | | | 66 | |
| Advisor Shares | | | — | | | | — | | | | — | |
| Shares issued in connection with the acquisition of | | | | | | | | | | | | |
| Brown Advisory Opportunity Fund: | | | | | | | | | | | | |
| Investor Shares | | | 10,035,030 | | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | 19,124,627 | | | | 2,717,408 | | | | (68,732,338 | ) |
| Increase (Decrease) in Net Assets | | | 19,047,934 | | | | 1,057,697 | | | | (70,370,896 | ) |
| NET ASSETS | | | | | | | | | | | | |
| Beginning of year / period | | | — | | | | 149,613,360 | | | | 219,984,256 | |
| End of year / period | | $ | 19,047,934 | | | $ | 150,671,057 | | | $ | 149,613,360 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | 4,902 | | | $ | (228,041 | ) | | $ | (190,234 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | |
| Investor Shares | | | 975,169 | | | | 1,625,524 | | | | 2,702,238 | |
| Advisor Shares | | | — | | | | 663 | | | | 2,759 | |
| Reinvestment of distributions: | | | | | | | | | | | | |
| Investor Shares | | | — | | | | 87,620 | | | | 69,244 | |
| Advisor Shares | | | — | | | | 8,275 | | | | 11,158 | |
| Redemption of shares: | | | | | | | | | | | | |
| Investor Shares | | | (43,140 | ) | | | (1,422,290 | ) | | | (8,904,829 | ) |
| Advisor Shares | | | — | | | | (48,235 | ) | | | (289,204 | ) |
| Shares issued in connection with the acquisition of | | | | | | | | | | | | |
| Brown Advisory Opportunity Fund: | | | | | | | | | | | | |
| Investor Shares | | | 994,393 | | | | — | | | | — | |
| Increase (Decrease) from Share Transactions | | | 1,926,422 | | | | 251,557 | | | | (6,408,634 | ) |
| * | Commenced operations on July 1, 2015. The information presented is for the period from July 1, 2015 (end of day) to December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
Statements of Changes in Net Assets
| | | BROWN ADVISORY | | | BROWN ADVISORY | |
| | | TOTAL RETURN FUND | | | STRATEGIC BOND FUND | |
| | | Six Months Ended | | | | | | Six Months Ended | | | | |
| | | December 31, | | | Period Ended | | | December 31, | | | Year Ended | |
| | | 2015 | | | June 30, | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015* | | | (Unaudited) | | | 2015 | |
| OPERATIONS | | | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 1,079,830 | | | $ | 828,180 | | | $ | 935,690 | | | $ | 947,449 | |
| Net realized gains (losses) | | | (303,018 | ) | | | (971,999 | ) | | | (1,705,071 | ) | | | (827,486 | ) |
| Net change in unrealized appreciation (depreciation) | | | (113,410 | ) | | | (659,223 | ) | | | 116,841 | | | | (1,128,037 | ) |
| Increase (Decrease) in Net Assets from Operations | | | 663,402 | | | | (803,042 | ) | | | (652,540 | ) | | | (1,008,074 | ) |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (1,089,031 | ) | | | (682,226 | ) | | | — | | | | — | |
| Investor Shares | | | (71,371 | ) | | | (154,576 | ) | | | (1,833,058 | ) | | | (184,113 | ) |
| Advisor Shares | | | — | | | | — | | | | (44,753 | ) | | | (16,546 | ) |
| Total Distributions to Shareholders | | | (1,160,402 | ) | | | (836,802 | ) | | | (1,877,811 | ) | | | (200,659 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 12,204,255 | | | | 77,851,406 | | | | — | | | | — | |
| Investor Shares | | | 904,994 | | | | 65,246,223 | | | | 2,095,738 | | | | 63,812,872 | |
| Advisor Shares | | | — | | | | — | | | | — | | | | 660,164 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 49,366 | | | | 14,220 | | | | — | | | | — | |
| Investor Shares | | | 63,856 | | | | 79,537 | | | | 241,219 | | | | 10,665 | |
| Advisor Shares | | | — | | | | — | | | | 32,973 | | | | 12,621 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (8,856,937 | ) | | | (1,951,607 | ) | | | — | | | | — | |
| Investor Shares | | | (8,577,719 | ) | | | (56,784,565 | ) | | | (15,696,037 | ) | | | (2,931,241 | ) |
| Advisor Shares | | | — | | | | — | | | | (794,501 | ) | | | (23,383,633 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | — | | | | — | |
| Investor Shares | | | — | | | | 170 | | | | — | | | | — | |
| Advisor Shares | | | — | | | | — | | | | — | | | | — | |
| Increase (Decrease) from Capital Share Transactions | | | (4,212,185 | ) | | | 84,455,384 | | | | (14,120,608 | ) | | | 38,181,448 | |
| Increase (Decrease) in Net Assets | | | (4,709,185 | ) | | | 82,815,540 | | | | (16,650,959 | ) | | | 36,972,715 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year / period | | | 82,815,540 | | | | — | | | | 61,371,834 | | | | 24,399,119 | |
| End of year / period | | $ | 78,106,355 | | | $ | 82,815,540 | | | $ | 44,720,875 | | | $ | 61,371,834 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (74,940 | ) | | $ | 5,632 | | | $ | (169,881 | ) | | $ | 772,240 | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,240,841 | | | | 7,692,250 | | | | — | | | | — | |
| Investor Shares | | | 91,343 | | | | 6,514,215 | | | | 219,175 | | | | 6,365,336 | |
| Advisor Shares | | | — | | | | — | | | | — | | | | 65,803 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 5,029 | | | | 1,421 | | | | — | | | | — | |
| Investor Shares | | | 6,462 | | | | 7,947 | | | | 25,214 | | | | 1,063 | |
| Advisor Shares | | | — | | | | — | | | | 3,442 | | | | 1,257 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (897,788 | ) | | | (196,362 | ) | | | — | | | | — | |
| Investor Shares | | | (871,321 | ) | | | (5,598,733 | ) | | | (1,640,103 | ) | | | (294,489 | ) |
| Advisor Shares | | | — | | | | — | | | | (83,783 | ) | | | (2,326,028 | ) |
| Increase (Decrease) from Share Transactions | | | (425,434 | ) | | | 8,420,738 | | | | (1,476,055 | ) | | | 3,812,942 | |
| * | Commenced operations on October 30, 2014. The information presented is for the period from October 30, 2014 to June 30, 2015. |
The accompanying notes are an integral part of these financial statements.
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 | |
| | | 2015 | | | June 30, | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | (Unaudited) | | | 2015 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income | | $ | 1,962,963 | | | $ | 3,476,302 | | | $ | 2,517,891 | | | $ | 3,903,365 | |
| Net realized gains (losses) | | | 944,810 | | | | 585,355 | | | | (669,269 | ) | | | (946,691 | ) |
| Net change in unrealized appreciation (depreciation) | | | 1,034,514 | | | | (2,821,647 | ) | | | 2,865,992 | | | | (1,400,710 | ) |
| Increase in Net Assets from Operations | | | 3,942,287 | | | | 1,240,010 | | | | 4,714,614 | | | | 1,555,964 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Investor Shares | | | (1,963,017 | ) | | | (3,476,302 | ) | | | (2,518,167 | ) | | | (3,903,365 | ) |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Investor Shares | | | (906,772 | ) | | | (1,040,851 | ) | | | — | | | | — | |
| Total Distributions to Shareholders | | | (2,869,789 | ) | | | (4,517,153 | ) | | | (2,518,167 | ) | | | (3,903,365 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Investor Shares | | | 11,708,836 | | | | 53,347,422 | | | | 22,520,118 | | | | 97,415,938 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Investor Shares | | | 852,168 | | | | 1,121,200 | | | | 571,585 | | | | 850,588 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Investor Shares | | | (25,127,688 | ) | | | (57,440,183 | ) | | | (24,864,143 | ) | | | (76,942,910 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Investor Shares | | | — | | | | 442 | | | | — | | | | 787 | |
| Increase (Decrease) from Capital Share Transactions | | | (12,566,684 | ) | | | (2,971,119 | ) | | | (1,772,440 | ) | | | 21,324,403 | |
| Increase (Decrease) in Net Assets | | | (11,494,186 | ) | | | (6,248,262 | ) | | | 424,007 | | | | 18,977,002 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year / period | | | 199,469,131 | | | | 205,717,393 | | | | 224,154,475 | | | | 205,177,473 | |
| End of year / period | | $ | 187,974,945 | | | $ | 199,469,131 | | | $ | 224,578,482 | | | $ | 224,154,475 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (26 | ) | | $ | 28 | | | $ | (399 | ) | | $ | (123 | ) |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Investor Shares | | | 1,094,158 | | | | 4,947,707 | | | | 2,255,827 | | | | 9,696,551 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Investor Shares | | | 79,616 | | | | 104,124 | | | | 57,196 | | | | 84,697 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Investor Shares | | | (2,348,386 | ) | | | (5,332,469 | ) | | | (2,490,016 | ) | | | (7,659,517 | ) |
| Increase (Decrease) from Share Transactions | | | (1,174,612 | ) | | | (280,638 | ) | | | (176,993 | ) | | | 2,121,731 | |
The accompanying notes are an integral part of these financial statements.
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, | | | Year Ended | | | December 31, | | | Year Ended | |
| | | 2015 | | | June 30, | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | (Unaudited) | | | 2015 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income (loss) | | $ | 2,921,537 | | | $ | 5,722,383 | | | $ | (844,896 | ) | | $ | 3,017,569 | |
| Net realized gains (losses) | | | 54,357 | | | | 2,379,466 | | | | (8,777,806 | ) | | | (12,510,798 | ) |
| Net change in unrealized appreciation (depreciation) | | | (897,605 | ) | | | (2,496,970 | ) | | | (3,584,727 | ) | | | 3,959,200 | |
| Increase (Decrease) in Net Assets from Operations | | | 2,078,289 | | | | 5,604,879 | | | | (13,207,429 | ) | | | (5,534,029 | ) |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (3,181,700 | ) | | | (5,220,946 | ) | | | (2,992,321 | ) | | | (2,028,155 | ) |
| Investor Shares | | | (251,218 | ) | | | (1,048,373 | ) | | | — | | | | (161,265 | ) |
| Advisor Shares | | | — | | | | — | | | | — | | | | (3,195 | ) |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (1,251,294 | ) | | | (1,220,433 | ) | | | — | | | | — | |
| Investor Shares | | | (6,443 | ) | | | (354,459 | ) | | | — | | | | — | |
| Advisor Shares | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | | (4,690,655 | ) | | | (7,844,211 | ) | | | (2,992,321 | ) | | | (2,192,615 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 135,390,250 | | | | 120,438,550 | | | | 977,588,515 | | | | 128,250,563 | |
| Investor Shares | | | 4,223,218 | | | | 15,997,743 | | | | 8,043,168 | | | | 14,088,732 | |
| Advisor Shares | | | — | | | | — | | | | 266,951 | | | | 1,072,184 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,308,239 | | | | 1,264,476 | | | | 2,334,075 | | | | 136,737 | |
| Investor Shares | | | 157,030 | | | | 752,471 | | | | — | | | | 131,427 | |
| Advisor Shares | | | — | | | | — | | | | — | | | | 2,681 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (5,454,381 | ) | | | (44,771,378 | ) | | | (89,997,428 | ) | | | (83,625,059 | ) |
| Investor Shares | | | (31,320,005 | ) | | | (55,685,240 | ) | | | (22,140,898 | ) | | | (5,873,578 | ) |
| Advisor Shares | | | — | | | | — | | | | (410,200 | ) | | | (230,575 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | — | | | | 1 | | | | — | |
| Investor Shares | | | — | | | | — | | | | — | | | | 5,075 | |
| Advisor Shares | | | — | | | | — | | | | — | | | | 49 | |
| Increase from Capital Share Transactions | | | 104,304,351 | | | | 37,996,622 | | | | 875,684,184 | | | | 53,958,236 | |
| Increase in Net Assets | | | 101,691,985 | | | | 35,757,290 | | | | 859,484,434 | | | | 46,231,592 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year / period | | | 234,948,466 | | | | 199,191,176 | | | | 267,097,727 | | | | 220,866,135 | |
| End of year / period | | $ | 336,640,451 | | | $ | 234,948,466 | | | $ | 1,126,582,161 | | | $ | 267,097,727 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (494,809 | ) | | $ | 16,572 | | | $ | (845,498 | ) | | $ | 2,991,719 | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 13,403,710 | | | | 11,840,919 | | | | 94,752,512 | | | | 12,789,191 | |
| Investor Shares | | | 416,088 | | | | 1,573,302 | | | | 804,482 | | | | 1,385,487 | |
| Advisor Shares | | | — | | | | — | | | | 26,226 | | | | 105,099 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 130,272 | | | | 125,482 | | | | 225,951 | | | | 14,053 | |
| Investor Shares | | | 15,509 | | | | 74,490 | | | | — | | | | 13,521 | |
| Advisor Shares | | | — | | | | — | | | | — | | | | 276 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (538,834 | ) | | | (4,401,492 | ) | | | (8,911,970 | ) | | | (8,631,771 | ) |
| Investor Shares | | | (3,107,096 | ) | | | (5,472,951 | ) | | | (2,172,701 | ) | | | (587,647 | ) |
| Advisor Shares | | | — | | | | — | | | | (40,868 | ) | | | (22,565 | ) |
| Increase from Share Transactions | | | 10,319,649 | | | | 3,739,750 | | | | 84,683,632 | | | | 5,065,644 | |
The accompanying notes are an integral part of these financial statements.
Statements of Changes in Net Assets
| | | BROWN ADVISORY – | | | BROWN ADVISORY – | |
| | | WMC JAPAN ALPHA | | | SOMSERSET EMERGING | |
| | | OPPORTUNITIES FUND | | | MARKETS FUND | |
| | | Six Months Ended | | | | | | Six Months Ended | | | | |
| | | December 31, | | | Year Ended | | | December 31, | | | Year Ended | |
| | | 2015 | | | June 30, | | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | (Unaudited) | | | 2015 | |
| OPERATIONS | | | | | | | | | | | | |
| Net investment income | | $ | 2,360,501 | | | $ | 5,364,284 | | | $ | 1,717,748 | | | $ | 3,540,051 | |
| Net realized gains (losses) | | | (109,795,222 | ) | | | 268,242,436 | | | | (14,247,679 | ) | | | 2,204,829 | |
| Net change in unrealized appreciation (depreciation) | | | (40,298,287 | ) | | | 75,794,530 | | | | (50,825,501 | ) | | | (16,502,944 | ) |
| Increase (Decrease) in Net Assets from Operations | | | (147,733,008 | ) | | | 349,401,250 | | | | (63,355,432 | ) | | | (10,758,064 | ) |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (188,806,891 | ) | | | (56,510,560 | ) | | | (2,214,836 | ) | | | (3,242,870 | ) |
| Investor Shares | | | (2,854,667 | ) | | | (515,706 | ) | | | (1,712,443 | ) | | | (540,676 | ) |
| Advisor Shares | | | (139,380 | ) | | | (5,171 | ) | | | (742 | ) | | | (6,119 | ) |
| Net realized gain: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (39,006,683 | ) | | | (7,825,633 | ) | | | — | | | | — | |
| Investor Shares | | | (593,987 | ) | | | (72,262 | ) | | | — | | | | — | |
| Advisor Shares | | | (29,833 | ) | | | (749 | ) | | | — | | | | — | |
| Total Distributions to Shareholders | | | (231,431,441 | ) | | | (64,930,081 | ) | | | (3,928,021 | ) | | | (3,789,665 | ) |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,131,015,964 | | | | 429,017,811 | | | | 97,239,782 | | | | 122,818,655 | |
| Investor Shares | | | 16,074,966 | | | | 19,702,437 | | | | 147,921,706 | | | | 146,036,626 | |
| Advisor Shares | | | 1,251,391 | | | | 1,666,578 | | | | 196,787 | | | | 558,959 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 13,872,815 | | | | 2,070,113 | | | | 455,104 | | | | 490,258 | |
| Investor Shares | | | 3,431,115 | | | | 586,590 | | | | 1,685,181 | | | | 429,370 | |
| Advisor Shares | | | 165,236 | | | | 5,920 | | | | 726 | | | | 6,119 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (187,926,857 | ) | | | (210,662,995 | ) | | | (125,010,358 | ) | | | (37,255,938 | ) |
| Investor Shares | | | (4,607,421 | ) | | | (2,531,378 | ) | | | (106,501,036 | ) | | | (11,527,368 | ) |
| Advisor Shares | | | (1,494,491 | ) | | | (115,120 | ) | | | (626,728 | ) | | | (116,905 | ) |
| Redemption fees: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | — | | | | 443 | | | | — | | | | — | |
| Investor Shares | | | 969 | | | | 1,272 | | | | 207 | | | | — | |
| Advisor Shares | | | — | | | | — | | | | — | | | | — | |
| Increase from Capital Share Transactions | | | 971,783,687 | | | | 239,741,671 | | | | 15,361,371 | | | | 221,439,776 | |
| Increase (Decrease) in Net Assets | | | 592,619,238 | | | | 524,212,840 | | | | (51,922,082 | ) | | | 206,892,047 | |
| NET ASSETS | | | | | | | | | | | | | | | | |
| Beginning of year / period | | | 1,609,511,043 | | | | 1,085,298,203 | | | | 425,391,810 | | | | 218,499,763 | |
| End of year / period | | $ | 2,202,130,281 | | | $ | 1,609,511,043 | | | $ | 373,469,728 | | | $ | 425,391,810 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (15,538,184 | ) | | $ | 173,902,253 | | | $ | 495,987 | | | $ | 2,706,260 | |
| SHARE TRANSACTIONS | | | | | | | | | | | | | | | | |
| Sale of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 90,415,775 | | | | 37,938,780 | | | | 11,278,797 | | | | 12,355,851 | |
| Investor Shares | | | 1,342,224 | | | | 1,726,060 | | | | 17,004,537 | | | | 14,781,054 | |
| Advisor Shares | | | 102,579 | | | | 133,674 | | | | 23,231 | | | | 56,038 | |
| Reinvestment of distributions: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | 1,236,172 | | | | 188,021 | | | | 54,569 | | | | 51,770 | |
| Investor Shares | | | 307,350 | | | | 53,278 | | | | 202,303 | | | | 45,388 | |
| Advisor Shares | | | 14,836 | | | | 538 | | | | 87 | | | | 647 | |
| Redemption of shares: | | | | | | | | | | | | | | | | |
| Institutional Shares | | | (15,820,363 | ) | | | (17,819,683 | ) | | | (14,453,593 | ) | | | (3,801,894 | ) |
| Investor Shares | | | (393,472 | ) | | | (211,427 | ) | | | (12,428,315 | ) | | | (1,179,864 | ) |
| Advisor Shares | | | (127,075 | ) | | | (9,321 | ) | | | (75,237 | ) | | | (11,945 | ) |
| Increase from Share Transactions | | | 77,078,026 | | | | 21,999,920 | | | | 1,606,379 | | | | 22,297,045 | |
The accompanying notes are an integral part of these financial statements.
Statements of Changes in Net Assets
| | | BROWN ADVISORY | |
| | | EMERGING MARKETS | |
| | | SMALL-CAP FUND | |
| | | Six Months Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015* | |
| OPERATIONS | | | | | | | |
| Net investment income (loss) | | $ | (300,604 | ) | | $ | 199,181 | |
| Net realized gains (losses) | | | (10,633,919 | ) | | | 7,874,779 | |
| Net change in unrealized appreciation (depreciation) | | | (18,454,256 | ) | | | 13,827,711 | |
| Increase (Decrease) in Net Assets from Operations | | | (29,388,779 | ) | | | 21,901,671 | |
| DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
| Net realized gain: | | | | | | | | |
| Institutional Shares | | | (8,236,160 | ) | | | — | |
| Investor Shares | | | (267,081 | ) | | | — | |
| Total Distributions to Shareholders | | | (8,503,241 | ) | | | — | |
| CAPITAL SHARE TRANSACTIONS | | | | | | | | |
| Sale of shares: | | | | | | | | |
| Institutional Shares | | | 74,216,212 | | | | 172,179,444 | |
| Investor Shares | | | 6,419,795 | | | | 19,556,483 | |
| Reinvestment of distributions: | | | | | | | | |
| Institutional Shares | | | 4,501,118 | | | | — | |
| Investor Shares | | | 244,075 | | | | — | |
| Redemption of shares: | | | | | | | | |
| Institutional Shares | | | (30,670,251 | ) | | | (4,525,254 | ) |
| Investor Shares | | | (16,330,519 | ) | | | (2,219,470 | ) |
| Redemption fees: | | | | | | | | |
| Institutional Shares | | | — | | | | 46 | |
| Investor Shares | | | 1 | | | | — | |
| Increase from Capital Share Transactions | | | 38,380,431 | | | | 184,991,249 | |
| Increase in Net Assets | | | 488,411 | | | | 206,892,920 | |
| NET ASSETS | | | | | | | | |
| Beginning of year / period | | | 206,892,920 | | | | — | |
| End of year / period | | $ | 207,381,331 | | | $ | 206,892,920 | |
| Undistributed (Accumulated) net investment income (loss) | | $ | (300,604 | ) | | $ | — | |
| SHARE TRANSACTIONS | | | | | | | | |
| Sale of shares: | | | | | | | | |
| Institutional Shares | | | 7,099,384 | | | | 16,476,173 | |
| Investor Shares | | | 607,341 | | | | 1,814,477 | |
| Reinvestment of distributions: | | | | | | | | |
| Institutional Shares | | | 463,679 | | | | — | |
| Investor Shares | | | 25,187 | | | | — | |
| Redemption of shares: | | | | | | | | |
| Institutional Shares | | | (3,015,292 | ) | | | (418,641 | ) |
| Investor Shares | | | (1,560,636 | ) | | | (190,007 | ) |
| Increase from Share Transactions | | | 3,619,663 | | | | 17,682,002 | |
| * | Commenced operations on November 21, 2014. The information presented is for the period from November 21, 2014 to June 30, 2015. |
The accompanying notes are an integral part of these financial statements.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013(g) | |
| Net Asset Value, Beginning of Year / Period | | $ | 20.33 | | | $ | 19.10 | | | $ | 16.22 | | | $ | 14.58 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | 0.02 | | | | — | | | | 0.01 | |
| Net Realized And Unrealized Gains | | | 0.42 | | | | 1.82 | | | | 2.99 | | | | 1.66 | |
| Total from Investment Operations | | $ | 0.41 | | | $ | 1.84 | | | $ | 2.99 | | | $ | 1.67 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | — | | | | — | | | | — | | | | (0.03 | ) |
| from Net Realized Gains | | | (1.28 | ) | | | (0.61 | ) | | | (0.11 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (1.28 | ) | | $ | (0.61 | ) | | $ | (0.11 | ) | | $ | (0.03 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 19.46 | | | $ | 20.33 | | | $ | 19.10 | | | $ | 16.22 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 2.07 | %(b) | | | 9.73 | % | | | 18.46 | % | | | 11.49 | %(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 258,369 | | | $ | 259,098 | | | $ | 233,627 | | | $ | 116,575 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | (0.11 | )%(c) | | | 0.09 | % | | | 0.03 | % | | | 0.30 | %(c) |
| Net Expenses | | | 0.72 | %(c) | | | 0.72 | % | | | 0.74 | % | | | 0.78 | %(c) |
| Gross Expenses(d) | | | 0.72 | %(c) | | | 0.72 | % | | | 0.74 | % | | | 0.78 | %(c) |
| Portfolio Turnover Rate | | | 13 | %(b) | | | 24 | % | | | 25 | % | | | 40 | %(f) |
| (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) | Reflects portfolio turnover at the Fund level for the year ended June 30, 2013. |
| (g) | 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.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 20.26 | | | $ | 19.07 | | | $ | 16.21 | | | $ | 13.80 | | | $ | 13.63 | | | $ | 9.99 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.03 | ) | | | (0.01 | ) | | | (0.02 | ) | | | 0.03 | | | | (0.05 | ) | | | (0.04 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 0.42 | | | | 1.81 | | | | 2.99 | | | | 2.41 | | | | 0.22 | | | | 3.68 | |
| Total from Investment Operations | | $ | 0.39 | | | $ | 1.80 | | | $ | 2.97 | | | $ | 2.44 | | | $ | 0.17 | | | $ | 3.64 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | — | | | | — | | | | — | | | | (0.03 | ) | | | — | | | | — | |
| from Net Realized Gains | | | (1.28 | ) | | | (0.61 | ) | | | (0.11 | ) | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (1.28 | ) | | $ | (0.61 | ) | | $ | (0.11 | ) | | $ | (0.03 | ) | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 19.37 | | | $ | 20.26 | | | $ | 19.07 | | | $ | 16.21 | | | $ | 13.80 | | | $ | 13.63 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 1.97 | %(b) | | | 9.54 | % | | | 18.35 | % | | | 17.67 | % | | | 1.25 | % | | | 36.44 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | $ | 2,077,177 | | | $ | 2,143,325 | | | $ | 2,497,036 | | | $ | 1,653,389 | | | $ | 954,560 | | | $ | 463,228 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | (0.26 | )%(c) | | | (0.06 | )% | | | (0.12 | )% | | | 0.17 | % | | | (0.35 | )% | | | (0.29 | )% |
| Net Expenses | | | 0.87 | %(c) | | | 0.87 | % | | | 0.89 | % | | | 0.91 | % | | | 0.90 | % | | | 0.94 | % |
| Gross Expenses(d) | | | 0.87 | %(c) | | | 0.87 | % | | | 0.89 | % | | | 0.91 | % | | | 0.90 | % | | | 0.94 | % |
| Portfolio Turnover Rate | | | 13 | %(b) | | | 24 | % | | | 25 | % | | | 40 | % | | | 58 | % | | | 30 | % |
| (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. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 19.60 | | | $ | 18.51 | | | $ | 15.78 | | | $ | 13.45 | | | $ | 13.31 | | | $ | 9.80 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.05 | ) | | | (0.06 | ) | | | (0.07 | ) | | | (0.01 | ) | | | (0.07 | ) | | | (0.09 | ) |
| Net Realized And Unrealized Gains (Losses) | | | 0.41 | | | | 1.76 | | | | 2.91 | | | | 2.35 | | | | 0.21 | | | | 3.60 | |
| Total from Investment Operations | | $ | 0.36 | | | $ | 1.70 | | | $ | 2.84 | | | $ | 2.34 | | | $ | 0.14 | | | $ | 3.51 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | — | | | | — | | | | — | | | | (0.01 | ) | | | — | | | | — | |
| from Net Realized Gains | | | (1.28 | ) | | | (0.61 | ) | | | (0.11 | ) | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (1.28 | ) | | $ | (0.61 | ) | | $ | (0.11 | ) | | $ | (0.01 | ) | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (f) | | | — | (f) | | | — | (f) | | | — | (f) | | | — | (f) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 18.68 | | | $ | 19.60 | | | $ | 18.51 | | | $ | 15.78 | | | $ | 13.45 | | | $ | 13.31 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | 1.89 | %(c) | | | 9.28 | % | | | 18.02 | % | | | 17.43 | % | | | 1.05 | % | | | 35.82 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | $ | 38,122 | | | $ | 44,587 | | | $ | 48,632 | | | $ | 21,478 | | | $ | 11,593 | | | $ | 5,698 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.51 | )%(d) | | | (0.31 | )% | | | (0.37 | )% | | | (0.07 | )% | | | (0.55 | )% | | | (0.74 | )% |
| Net Expenses | | | 1.12 | %(d) | | | 1.12 | % | | | 1.14 | % | | | 1.15 | % | | | 1.10 | % | | | 1.39 | % |
| Gross Expenses(e) | | | 1.12 | %(d) | | | 1.12 | % | | | 1.14 | % | | | 1.15 | % | | | 1.10 | % | | | 1.39 | % |
| Portfolio Turnover Rate | | | 13 | %(c) | | | 24 | % | | | 25 | % | | | 40 | % | | | 58 | % | | | 30 | % |
| (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 year ended June 30, 2011. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (f) | Less than $0.01 per share. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 17.52 | | | $ | 18.75 | | | $ | 14.74 | | | $ | 13.05 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.13 | | | | 0.27 | | | | 0.22 | | | | 0.18 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.57 | ) | | | (0.68 | ) | | | 3.95 | | | | 1.74 | |
| Total from Investment Operations | | $ | (1.44 | ) | | $ | (0.41 | ) | | $ | 4.17 | | | $ | 1.92 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.23 | ) | | | (0.28 | ) | | | (0.16 | ) | | | (0.23 | ) |
| from Net Realized Gains | | | (1.96 | ) | | | (0.54 | ) | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (2.19 | ) | | $ | (0.82 | ) | | $ | (0.16 | ) | | $ | (0.23 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 13.89 | | | $ | 17.52 | | | $ | 18.75 | | | $ | 14.74 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | (8.11 | )%(b) | | | (2.20 | )% | | | 28.41 | % | | | 14.99 | %(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 13 | | | $ | 14 | | | $ | 15 | | | $ | 12 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.54 | %(c) | | | 1.49 | % | | | 1.31 | % | | | 1.67 | %(c) |
| Net Expenses | | | 0.76 | %(c) | | | 0.75 | % | | | 0.77 | % | | | 0.81 | %(c) |
| Gross Expenses(d) | | | 0.76 | %(c) | | | 0.75 | % | | | 0.77 | % | | | 0.81 | %(c) |
| Portfolio Turnover Rate | | | 19 | %(b) | | | 45 | % | | | 37 | % | | | 57 | %(e) |
| (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) | Reflects portfolio turnover at the Fund level for the year ended June 30, 2013. |
| (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.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 17.52 | | | $ | 18.75 | | | $ | 14.74 | | | $ | 12.30 | | | $ | 12.56 | | | $ | 9.69 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.12 | | | | 0.24 | | | | 0.20 | | | | 0.21 | | | | 0.15 | | | | 0.16 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.58 | ) | | | (0.68 | ) | | | 3.95 | | | | 2.45 | | | | (0.33 | ) | | | 2.83 | |
| Total from Investment Operations | | $ | (1.46 | ) | | $ | (0.44 | ) | | $ | 4.15 | | | $ | 2.66 | | | $ | (0.18 | ) | | $ | 2.99 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.20 | ) | | | (0.25 | ) | | | (0.14 | ) | | | (0.22 | ) | | | (0.08 | ) | | | (0.12 | ) |
| from Net Realized Gains | | | (1.96 | ) | | | (0.54 | ) | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (2.16 | ) | | $ | (0.79 | ) | | $ | (0.14 | ) | | $ | (0.22 | ) | | $ | (0.08 | ) | | $ | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | (e) | | | — | (e) | | | — | | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 13.90 | | | $ | 17.52 | | | $ | 18.75 | | | $ | 14.74 | | | $ | 12.30 | | | $ | 12.56 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (8.21 | )%(b) | | | (2.35 | )% | | | 28.26 | % | | | 21.91 | % | | | (1.35 | )% | | | 30.90 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 118,383 | | | $ | 166,808 | | | $ | 241,666 | | | $ | 160,800 | | | $ | 156,226 | | | $ | 177,918 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.39 | %(c) | | | 1.34 | % | | | 1.16 | % | | | 1.54 | % | | | 1.27 | % | | | 1.34 | % |
| Net Expenses | | | 0.91 | %(c) | | | 0.90 | % | | | 0.92 | % | | | 0.94 | % | | | 0.91 | % | | | 0.93 | % |
| Gross Expenses(d) | | | 0.91 | %(c) | | | 0.90 | % | | | 0.92 | % | | | 0.94 | % | | | 0.91 | % | | | 0.93 | % |
| Portfolio Turnover Rate | | | 19 | %(b) | | | 45 | % | | | 37 | % | | | 57 | % | | | 72 | % | | | 64 | % |
| (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. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 17.62 | | | $ | 18.85 | | | $ | 14.82 | | | $ | 12.36 | | | $ | 12.62 | | | $ | 9.74 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.09 | | | | 0.20 | | | | 0.15 | | | | 0.16 | | | | 0.13 | | | | 0.10 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.57 | ) | | | (0.69 | ) | | | 3.98 | | | | 2.49 | | | | (0.32 | ) | | | 2.84 | |
| Total from Investment Operations | | $ | (1.48 | ) | | $ | (0.49 | ) | | $ | 4.13 | | | $ | 2.65 | | | $ | (0.19 | ) | | $ | 2.94 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.17 | ) | | | (0.20 | ) | | | (0.10 | ) | | | (0.19 | ) | | | (0.07 | ) | | | (0.06 | ) |
| from Realized Gains | | | (1.96 | ) | | | (0.54 | ) | | | — | | | | — | | | | — | | | | — | |
| Total Distributions to Shareholders | | $ | (2.13 | ) | | $ | (0.74 | ) | | $ | (0.10 | ) | | $ | (0.19 | ) | | $ | (0.07 | ) | | $ | (0.06 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (f) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 14.01 | | | $ | 17.62 | | | $ | 18.85 | | | $ | 14.82 | | | $ | 12.36 | | | $ | 12.62 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | (8.31 | )%(c) | | | (2.61 | )% | | | 27.90 | % | | | 21.63 | % | | | (1.45 | )% | | | 30.28 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 1,033 | | | $ | 1,183 | | | $ | 1,635 | | | $ | 1,615 | | | $ | 2,201 | | | $ | 2,996 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 1.14 | %(d) | | | 1.09 | % | | | 0.91 | % | | | 1.31 | % | | | 1.07 | % | | | 0.89 | % |
| Net Expenses | | | 1.16 | %(d) | | | 1.15 | % | | | 1.17 | % | | | 1.17 | % | | | 1.11 | % | | | 1.38 | % |
| Gross Expenses(e) | | | 1.16 | %(d) | | | 1.15 | % | | | 1.17 | % | | | 1.17 | % | | | 1.11 | % | | | 1.38 | % |
| Portfolio Turnover Rate | | | 19 | %(c) | | | 45 | % | | | 37 | % | | | 57 | % | | | 72 | % | | | 64 | % |
| (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 year ended June 30, 2011. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (f) | Less than $0.01 per share. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 15.92 | | | $ | 14.81 | | | $ | 12.28 | | | $ | 10.46 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.06 | | | | 0.12 | | | | 0.09 | | | | 0.06 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.44 | ) | | | 1.08 | | | | 2.49 | | | | 1.82 | |
| Total from Investment Operations | | $ | (0.38 | ) | | $ | 1.20 | | | $ | 2.58 | | | $ | 1.88 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.11 | ) | | | (0.09 | ) | | | (0.05 | ) | | | (0.06 | ) |
| Total Distributions to Shareholders | | $ | (0.11 | ) | | $ | (0.09 | ) | | $ | (0.05 | ) | | $ | (0.06 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.43 | | | $ | 15.92 | | | $ | 14.81 | | | $ | 12.28 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | (2.38 | )%(b) | | | 8.09 | % | | | 21.06 | % | | | 18.07 | %(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 17,246 | | | $ | 4,240 | | | $ | 3,126 | | | $ | 12 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.78 | %(c) | | | 0.76 | % | | | 0.66 | % | | | 0.65 | %(c) |
| Net Expenses | | | 0.74 | %(c) | | | 0.76 | % | | | 0.82 | % | | | 1.00 | %(c) |
| Gross Expenses(d) | | | 0.74 | %(c) | | | 0.76 | % | | | 0.81 | % | | | 0.88 | %(c) |
| Portfolio Turnover Rate | | | 5 | %(b) | | | 7 | % | | | 15 | % | | | 12 | %(e) |
| (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) | Reflects portfolio turnover at the Fund level for the year ended June 30, 2013. |
| (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.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 15.89 | | | $ | 14.79 | | | $ | 12.28 | | | $ | 9.68 | | | $ | 9.16 | | | $ | 7.33 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.05 | | | | 0.10 | | | | 0.07 | | | | 0.05 | | | | 0.05 | | | | 0.02 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.44 | ) | | | 1.07 | | | | 2.48 | | | | 2.60 | | | | 0.50 | | | | 1.83 | |
| Total from Investment Operations | | $ | (0.39 | ) | | $ | 1.17 | | | $ | 2.55 | | | $ | 2.65 | | | $ | 0.55 | | | $ | 1.85 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.09 | ) | | | (0.07 | ) | | | (0.04 | ) | | | (0.05 | ) | | | (0.03 | ) | | | (0.02 | ) |
| from Return of Capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | (e) |
| Total Distributions to Shareholders | | $ | (0.09 | ) | | $ | (0.07 | ) | | $ | (0.04 | ) | | $ | (0.05 | ) | | $ | (0.03 | ) | | $ | (0.02 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.41 | | | $ | 15.89 | | | $ | 14.79 | | | $ | 12.28 | | | $ | 9.68 | | | $ | 9.16 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (2.47 | )%(b) | | | 7.92 | % | | | 20.78 | % | | | 27.51 | % | | | 5.98 | % | | | 25.27 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 275,361 | | | $ | 268,569 | | | $ | 162,615 | | | $ | 82,783 | | | $ | 37,477 | | | $ | 26,827 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.63 | %(c) | | | 0.61 | % | | | 0.51 | % | | | 0.50 | % | | | 0.52 | % | | | 0.28 | % |
| Net Expenses | | | 0.89 | %(c) | | | 0.91 | % | | | 0.97 | % | | | 1.15 | % | | | 1.15 | % | | | 1.15 | % |
| Gross Expenses(d) | | | 0.89 | %(c) | | | 0.91 | % | | | 0.96 | % | | | 1.05 | % | | | 1.18 | % | | | 1.32 | % |
| Portfolio Turnover Rate | | | 5 | %(b) | | | 7 | % | | | 15 | % | | | 12 | % | | | 19 | % | | | 33 | % |
| (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. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 15.88 | | | $ | 14.77 | | | $ | 12.28 | | | $ | 9.68 | | | $ | 9.17 | | | $ | 7.33 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.03 | | | | 0.06 | | | | 0.04 | | | | 0.02 | | | | 0.03 | | | | 0.01 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.44 | ) | | | 1.07 | | | | 2.48 | | | | 2.61 | | | | 0.49 | | | | 1.84 | |
| Total from Investment Operations | | $ | (0.41 | ) | | $ | 1.13 | | | $ | 2.52 | | | $ | 2.63 | | | $ | 0.52 | | | $ | 1.85 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.04 | ) | | | (0.02 | ) | | | (0.03 | ) | | | (0.03 | ) | | | (0.01 | ) | | | (0.01 | ) |
| from Return of Capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | (f) |
| Total Distributions to Shareholders | | $ | (0.04 | ) | | $ | (0.02 | ) | | $ | (0.03 | ) | | $ | (0.03 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (f) | | | — | | | | — | | | | — | | | | — | | | | — | (f) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.43 | | | $ | 15.88 | | | $ | 14.77 | | | $ | 12.28 | | | $ | 9.68 | | | $ | 9.17 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | (2.60 | )%(c) | | | 7.68 | % | | | 20.52 | % | | | 27.25 | % | | | 5.73 | % | | | 25.18 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 10,143 | | | $ | 11,540 | | | $ | 14,831 | | | $ | 6,115 | | | $ | 1,079 | | | $ | 1,259 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.38 | %(d) | | | 0.36 | % | | | 0.26 | % | | | 0.30 | % | | | 0.32 | % | | | 0.08 | % |
| Net Expenses | | | 1.14 | %(d) | | | 1.16 | % | | | 1.22 | % | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % |
| Gross Expenses(e) | | | 1.14 | %(d) | | | 1.16 | % | | | 1.21 | % | | | 1.30 | % | | | 1.38 | % | | | 1.53 | % |
| Portfolio Turnover Rate | | | 5 | %(c) | | | 7 | % | | | 15 | % | | | 12 | % | | | 19 | % | | | 33 | % |
| (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 year ended June 30, 2011. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers or recoupments. |
| (f) | Less than $0.01 per share. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 13.14 | | | $ | 13.70 | | | $ | 12.16 | | | $ | 11.07 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.16 | | | | 0.29 | | | | 0.29 | | | | 0.21 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.69 | ) | | | 0.08 | | | | 1.99 | | | | 1.19 | |
| Total from Investment Operations | | $ | (0.53 | ) | | $ | 0.37 | | | $ | 2.28 | | | $ | 1.40 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.18 | ) | | | (0.30 | ) | | | (0.29 | ) | | | (0.23 | ) |
| from Net Realized Gains | | | (0.13 | ) | | | (0.63 | ) | | | (0.45 | ) | | | (0.08 | ) |
| Total Distributions to Shareholders | | $ | (0.31 | ) | | $ | (0.93 | ) | | $ | (0.74 | ) | | $ | (0.31 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 12.30 | | | $ | 13.14 | | | $ | 13.70 | | | $ | 12.16 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | (3.99 | )%(b) | | | 2.60 | % | | | 19.30 | % | | | 12.88 | %(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 17,886 | (b) | | $ | 18,134 | | | $ | 17,663 | | | $ | 11 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 2.56 | %(c) | | | 2.16 | % | | | 2.23 | % | | | 2.53 | %(c) |
| Net Expenses | | | 0.75 | %(c) | | | 0.75 | % | | | 0.77 | % | | | 0.80 | %(c) |
| Gross Expenses(d) | | | 0.75 | %(c) | | | 0.75 | % | | | 0.77 | % | | | 0.80 | %(c) |
| Portfolio Turnover Rate | | | 8 | %(b) | | | 18 | % | | | 32 | % | | | 21 | %(e) |
| (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) | Reflects portfolio turnover at the Fund level for the year ended June 30, 2013. |
| (f) | Commenced operations on October 19, 2012. The information presented is for the period from October 19, 2012 to June 30, 2012. |
The accompanying notes are an integral part of these financial statements.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 13.13 | | | $ | 13.69 | | | $ | 12.16 | | | $ | 10.49 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.16 | | | | 0.27 | | | | 0.27 | | | | 0.27 | | | | 0.15 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.70 | ) | | | 0.08 | | | | 1.98 | | | | 1.76 | | | | 0.46 | |
| Total from Investment Operations | | $ | (0.54 | ) | | $ | 0.35 | | | $ | 2.25 | | | $ | 2.03 | | | $ | 0.61 | |
| | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.17 | ) | | | (0.28 | ) | | | (0.27 | ) | | | (0.28 | ) | | | (0.12 | ) |
| from Net Realized Gains | | | (0.13 | ) | | | (0.63 | ) | | | (0.45 | ) | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.30 | ) | | $ | (0.91 | ) | | $ | (0.72 | ) | | $ | (0.36 | ) | | $ | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 12.29 | | | $ | 13.13 | | | $ | 13.69 | | | $ | 12.16 | | | $ | 10.49 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (4.08 | )%(b) | | | 2.45 | % | | | 19.04 | % | | | 19.62 | % | | | 6.11 | %(b) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 142,803 | | | $ | 183,001 | | | $ | 180,372 | | | $ | 173,599 | | | $ | 106,075 | |
| | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 2.41 | %(c) | | | 2.01 | % | | | 2.08 | % | | | 2.37 | % | | | 2.82 | %(c) |
| Net Expenses | | | 0.90 | %(c) | | | 0.90 | % | | | 0.92 | % | | | 0.96 | % | | | 0.99 | %(c) |
| Gross Expenses(d) | | | 0.90 | %(c) | | | 0.90 | % | | | 0.92 | % | | | 0.96 | % | | | 0.99 | %(c) |
| Portfolio Turnover Rate | | | 8 | %(b) | | | 18 | % | | | 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.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 13.11 | | | $ | 13.67 | | | $ | 12.14 | | | $ | 10.48 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.14 | | | | 0.24 | | | | 0.24 | | | | 0.25 | | | | 0.14 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.69 | ) | | | 0.07 | | | | 1.98 | | | | 1.75 | | | | 0.46 | |
| Total from Investment Operations | | $ | (0.55 | ) | | $ | 0.31 | | | $ | 2.22 | | | $ | 2.00 | | | $ | 0.60 | |
| | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.15 | ) | | | (0.24 | ) | | | (0.24 | ) | | | (0.26 | ) | | | (0.12 | ) |
| from Net Realized Gains | | | (0.13 | ) | | | (0.63 | ) | | | (0.45 | ) | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.28 | ) | | $ | (0.87 | ) | | $ | (0.69 | ) | | $ | (0.34 | ) | | $ | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 12.28 | | | $ | 13.11 | | | $ | 13.67 | | | $ | 12.14 | | | $ | 10.48 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (4.13 | )%(b) | | | 2.19 | % | | | 18.79 | % | | | 19.33 | % | | | 5.95 | %(b) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 2,761 | | | $ | 3,148 | | | $ | 3,298 | | | $ | 2,346 | | | $ | 636 | |
| | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 2.16 | %(c) | | | 1.76 | % | | | 1.83 | % | | | 2.13 | % | | | 2.60 | %(c) |
| Net Expenses | | | 1.15 | %(c) | | | 1.15 | % | | | 1.17 | % | | | 1.20 | % | | | 1.19 | %(c) |
| Gross Expenses(d) | | | 1.15 | %(c) | | | 1.15 | % | | | 1.17 | % | | | 1.20 | % | | | 1.19 | %(c) |
| Portfolio Turnover Rate | | | 8 | %(b) | | | 18 | % | | | 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.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | |
| Net Asset Value, Beginning of Year / Period | | $ | 15.69 | | | $ | 14.11 | | | $ | 11.64 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | (0.02 | ) | | | — | | | | — | |
| Net Realized And Unrealized Gains | | | 0.83 | | | | 1.91 | | | | 2.61 | | | | 1.65 | |
| Total from Investment Operations | | $ | 0.82 | | | $ | 1.89 | | | $ | 2.61 | | | $ | 1.65 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (0.75 | ) | | | (0.31 | ) | | | (0.14 | ) | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.75 | ) | | $ | (0.31 | ) | | $ | (0.14 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.76 | | | $ | 15.69 | | | $ | 14.11 | | | $ | 11.64 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 5.24 | %(b) | | | 13.50 | % | | | 22.51 | % | | | 16.47 | % |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 82,233 | | | $ | 67,789 | | | $ | 30,374 | | | $ | 32,045 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | (0.10 | )%(c) | | | (0.11 | )% | | | (0.01 | )% | | | 0.03 | % |
| Net Expenses | | | 0.74 | %(c) | | | 0.75 | % | | | 0.77 | % | | | 0.86 | % |
| Gross Expenses(d) | | | 0.74 | %(c) | | | 0.75 | % | | | 0.77 | % | | | 0.86 | % |
| Portfolio Turnover Rate | | | 13 | %(b) | | | 37 | % | | | 30 | % | | | 30 | % |
| (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. |
| * | 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.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | |
| Net Asset Value, Beginning of Year / Period | | $ | 15.61 | | | $ | 14.06 | | | $ | 11.62 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.02 | ) | | | (0.04 | ) | | | (0.02 | ) | | | (0.01 | ) |
| Net Realized And Unrealized Gains | | | 0.82 | | | | 1.90 | | | | 2.60 | | | | 1.64 | |
| Total from Investment Operations | | $ | 0.80 | | | $ | 1.86 | | | $ | 2.58 | | | $ | 1.63 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (0.75 | ) | | | (0.31 | ) | | | (0.14 | ) | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.75 | ) | | $ | (0.31 | ) | | $ | (0.14 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.66 | | | $ | 15.61 | | | $ | 14.06 | | | $ | 11.62 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 5.13 | %(b) | | | 13.34 | % | | | 22.29 | % | | | 16.27 | % |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 17,493 | | | $ | 11,206 | | | $ | 46,823 | | | $ | 24,028 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.25 | )%(c) | | | (0.26 | )% | | | (0.16 | )% | | | (0.12 | )% |
| Net Expenses | | | 0.89 | %(c) | | | 0.90 | % | | | 0.92 | % | | | 1.01 | % |
| Gross Expenses(d) | | | 0.89 | %(c) | | | 0.90 | % | | | 0.92 | % | | | 1.01 | % |
| Portfolio Turnover Rate | | | 13 | %(b) | | | 37 | % | | | 30 | % | | | 30 | % |
| (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. |
| * | 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.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | |
| Net Asset Value, Beginning of Year / Period | | $ | 15.50 | | | $ | 14.00 | | | $ | 11.60 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.04 | ) | | | (0.07 | ) | | | (0.05 | ) | | | (0.04 | ) |
| Net Realized And Unrealized Gains | | | 0.81 | | | | 1.88 | | | | 2.59 | | | | 1.65 | |
| Total from Investment Operations | | $ | 0.77 | | | $ | 1.81 | | | $ | 2.54 | | | $ | 1.61 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (0.75 | ) | | | (0.31 | ) | | | (0.14 | ) | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.75 | ) | | $ | (0.31 | ) | | $ | (0.14 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.52 | | | $ | 15.50 | | | $ | 14.00 | | | $ | 11.60 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 4.98 | %(b) | | | 13.03 | % | | | 21.99 | % | | | 16.07 | % |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 209,822 | | | $ | 137,410 | | | $ | 132,846 | | | $ | 124,256 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.50 | )%(c) | | | (0.51 | )% | | | (0.41 | )% | | | (0.37 | )% |
| Net Expenses | | | 1.14 | %(c) | | | 1.15 | % | | | 1.17 | % | | | 1.26 | % |
| Gross Expenses(d) | | | 1.14 | %(c) | | | 1.15 | % | | | 1.17 | % | | | 1.26 | % |
| Portfolio Turnover Rate | | | 13 | %(b) | | | 37 | % | | | 30 | % | | | 30 | % |
| (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. |
| * | 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.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 35.91 | | | $ | 35.85 | | | $ | 31.67 | | | $ | 28.36 | | | $ | 29.56 | | | $ | 20.75 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.08 | ) | | | (0.18 | ) | | | (0.22 | ) | | | (0.07 | ) | | | (0.21 | ) | | | (0.21 | ) |
| Net Realized And Unrealized Gains (Losses) | | | (0.37 | ) | | | 4.45 | | | | 6.08 | | | | 6.07 | | | | (0.72 | ) | | | 9.02 | |
| Total from Investment Operations | | $ | (0.45 | ) | | $ | 4.27 | | | $ | 5.86 | | | $ | 6.00 | | | $ | (0.93 | ) | | $ | 8.81 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (5.09 | ) | | | (4.21 | ) | | | (1.68 | ) | | | (2.69 | ) | | | (0.27 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (5.09 | ) | | $ | (4.21 | ) | | $ | (1.68 | ) | | $ | (2.69 | ) | | $ | (0.27 | ) | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 30.37 | | | $ | 35.91 | | | $ | 35.85 | | | $ | 31.67 | | | $ | 28.36 | | | $ | 29.56 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (1.07 | )%(b) | | | 12.98 | % | | | 18.59 | % | | | 22.84 | % | | | (3.08 | )% | | | 42.46 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 12,878 | | | $ | 12,841 | | | $ | 8,497 | | | $ | 7,347 | | | $ | 6,944 | | | $ | 8,732 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.46 | )%(c) | | | (0.51 | )% | | | (0.63 | )% | | | (0.24 | )% | | | (0.77 | )% | | | (0.80 | )% |
| Net Expenses | | | 0.99 | %(c) | | | 0.99 | % | | | 1.01 | % | | | 1.05 | % | | | 1.11 | % | | | 1.13 | % |
| Gross Expenses(d) | | | 0.99 | %(c) | | | 0.99 | % | | | 1.01 | % | | | 1.05 | % | | | 1.11 | % | | | 1.13 | % |
| Portfolio Turnover Rate | | | 19 | %(b) | | | 28 | % | | | 19 | % | | | 48 | % | | | 66 | % | | | 61 | % |
| (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. |
| * | Prior to October 19, 2012, Institutional Shares were known as D Shares. |
The accompanying notes are an integral part of these financial statements.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 18.05 | | | $ | 18.04 | | | $ | 15.96 | | | $ | 14.31 | | | $ | 15.07 | | | $ | 10.58 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.05 | ) | | | (0.11 | ) | | | (0.14 | ) | | | (0.05 | ) | | | (0.11 | ) | | | (0.11 | ) |
| Net Realized And Unrealized Gains (Losses) | | | (0.19 | ) | | | 2.24 | | | | 3.07 | | | | 3.06 | | | | (0.38 | ) | | | 4.60 | |
| Total from Investment Operations | | $ | (0.24 | ) | | $ | 2.13 | | | $ | 2.93 | | | $ | 3.01 | | | $ | (0.49 | ) | | $ | 4.49 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (2.56 | ) | | | (2.12 | ) | | | (0.85 | ) | | | (1.36 | ) | | | (0.27 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (2.56 | ) | | $ | (2.12 | ) | | $ | (0.85 | ) | | $ | (1.36 | ) | | $ | (0.27 | ) | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 15.25 | | | $ | 18.05 | | | $ | 18.04 | | | $ | 15.96 | | | $ | 14.31 | | | $ | 15.07 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (1.17 | )%(b) | | | 12.86 | % | | | 18.42 | % | | | 22.68 | % | | | (3.12 | )% | | | 42.44 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 248,067 | | | $ | 262,426 | | | $ | 285,287 | | | $ | 281,027 | | | $ | 215,311 | | | $ | 208,222 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.61 | )%(c) | | | (0.66 | )% | | | (0.78 | )% | | | (0.36 | )% | | | (0.82 | )% | | | (0.85 | )% |
| Net Expenses | | | 1.14 | %(c) | | | 1.14 | % | | | 1.16 | % | | | 1.17 | % | | | 1.16 | % | | | 1.18 | % |
| Gross Expenses(d) | | | 1.14 | %(c) | | | 1.14 | % | | | 1.16 | % | | | 1.17 | % | | | 1.16 | % | | | 1.18 | % |
| Portfolio Turnover Rate | | | 19 | %(b) | | | 28 | % | | | 19 | % | | | 48 | % | | | 66 | % | | | 61 | % |
| (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. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 17.35 | | | $ | 17.39 | | | $ | 15.43 | | | $ | 13.86 | | | $ | 14.65 | | | $ | 10.34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss(a) | | | (0.07 | ) | | | (0.15 | ) | | | (0.18 | ) | | | (0.09 | ) | | | (0.14 | ) | | | (0.18 | ) |
| Net Realized And Unrealized Gains (Losses) | | | (0.17 | ) | | | 2.15 | | | | 2.96 | | | | 2.97 | | | | (0.38 | ) | | | 4.49 | |
| Total from Investment Operations | | $ | (0.24 | ) | | $ | 2.00 | | | $ | 2.78 | | | $ | 2.88 | | | $ | (0.52 | ) | | $ | 4.31 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Realized Gains | | | (2.46 | ) | | | (2.04 | ) | | | (0.82 | ) | | | (1.31 | ) | | | (0.27 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (2.46 | ) | | $ | (2.04 | ) | | $ | (0.82 | ) | | $ | (1.31 | ) | | $ | (0.27 | ) | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (f) | | | — | | | | — | | | | — | | | | — | (f) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 14.65 | | | $ | 17.35 | | | $ | 17.39 | | | $ | 15.43 | | | $ | 13.86 | | | $ | 14.65 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | (1.23 | )%(c) | | | 12.54 | % | | | 18.07 | % | | | 22.45 | % | | | (3.41 | )% | | | 41.68 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 5,882 | | | $ | 6,348 | | | $ | 7,300 | | | $ | 5,493 | | | $ | 2,875 | | | $ | 3,110 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Loss | | | (0.86 | )%(d) | | | (0.91 | )% | | | (1.03 | )% | | | (0.60 | )% | | | (1.07 | )% | | | (1.36 | )% |
| Net Expenses | | | 1.39 | %(d) | | | 1.39 | % | | | 1.41 | % | | | 1.41 | % | | | 1.41 | % | | | 1.69 | % |
| Gross Expenses(e) | | | 1.39 | %(d) | | | 1.39 | % | | | 1.41 | % | | | 1.41 | % | | | 1.41 | % | | | 1.69 | % |
| Portfolio Turnover Rate | | | 19 | %(c) | | | 28 | % | | | 19 | % | | | 48 | % | | | 66 | % | | | 61 | % |
| (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 year ended June 30, 2011. |
| (c) | Not annualized. |
| (d) | Annualized. |
| (e) | Reflects the expense ratio excluding any waivers and/or expense reimbursements. |
| (f) | Less than $0.01 per share. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013(g) | |
| Net Asset Value, Beginning of Year / Period | | $ | 23.61 | | | $ | 23.96 | | | $ | 20.06 | | | $ | 16.77 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.07 | | | | 0.10 | | | | 0.12 | | | | 0.06 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.40 | ) | | | 0.86 | | | | 4.91 | | | | 3.30 | |
| Total from Investment Operations | | $ | (1.33 | ) | | $ | 0.96 | | | $ | 5.03 | | | $ | 3.36 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.10 | ) | | | (0.14 | ) | | | (0.19 | ) | | | (0.07 | ) |
| from Net Realized Gains | | | (0.45 | ) | | | (1.17 | ) | | | (0.94 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.55 | ) | | $ | (1.31 | ) | | $ | (1.13 | ) | | $ | (0.07 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | (e) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 21.73 | | | $ | 23.61 | | | $ | 23.96 | | | $ | 20.06 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | (5.60 | )%(b) | | | 4.04 | % | | | 25.37 | % | | | 20.13 | %(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 104,413 | | | $ | 75,994 | | | $ | 19,515 | | | $ | 1,061 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.63 | %(c) | | | 0.43 | % | | | 0.51 | % | | | 1.14 | %(c) |
| Net Expenses | | | 0.98 | %(c) | | | 0.98 | % | | | 1.00 | % | | | 1.05 | %(c) |
| Gross Expenses(d) | | | 0.98 | %(c) | | | 0.98 | % | | | 1.00 | % | | | 1.05 | %(c) |
| Portfolio Turnover Rate | | | 15 | %(b) | | | 26 | % | | | 30 | % | | | 34 | %(f) |
| (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) | Reflects portfolio turnover at the Fund level for the year ended June 30, 2013. |
| (g) | 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.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 23.59 | | | $ | 23.94 | | | $ | 20.06 | | | $ | 15.65 | | | $ | 16.89 | | | $ | 11.92 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.06 | | | | 0.07 | | | | 0.08 | | | | 0.18 | | | | 0.10 | | | | 0.11 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.40 | ) | | | 0.86 | | | | 4.90 | | | | 4.29 | | | | (0.51 | ) | | | 5.54 | |
| Total from Investment Operations | | $ | (1.34 | ) | | $ | 0.93 | | | $ | 4.98 | | | $ | 4.47 | | | $ | (0.41 | ) | | $ | 5.65 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.07 | ) | | | (0.11 | ) | | | (0.16 | ) | | | (0.06 | ) | | | (0.12 | ) | | | (0.08 | ) |
| from Net Realized Gains | | | (0.45 | ) | | | (1.17 | ) | | | (0.94 | ) | | | — | | | | (0.71 | ) | | | (0.60 | ) |
| Total Distributions to Shareholders | | $ | (0.52 | ) | | $ | (1.28 | ) | | $ | (1.10 | ) | | $ | (0.06 | ) | | $ | (0.83 | ) | | $ | (0.68 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 21.73 | | | $ | 23.59 | | | $ | 23.94 | | | $ | 20.06 | | | $ | 15.65 | | | $ | 16.89 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (5.66 | )%(b) | | | 3.90 | % | | | 25.13 | % | | | 28.64 | % | | | (1.90 | )% | | | 48.20 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 687,801 | | | $ | 748,003 | | | $ | 567,799 | | | $ | 371,018 | | | $ | 194,719 | | | $ | 107,537 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | 0.48 | %(c) | | | 0.28 | % | | | 0.36 | % | | | 1.01 | % | | | 0.64 | % | | | 0.70 | % |
| Net Expenses | | | 1.13 | %(c) | | | 1.13 | % | | | 1.15 | % | | | 1.18 | % | | | 1.19 | % | | | 1.24 | % |
| Gross Expenses(d) | | | 1.13 | %(c) | | | 1.13 | % | | | 1.15 | % | | | 1.18 | % | | | 1.19 | % | | | 1.24 | % |
| Portfolio Turnover Rate | | | 15 | %(b) | | | 26 | % | | | 30 | % | | | 34 | % | | | 36 | % | | | 67 | % |
| (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. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012(g) | |
| Net Asset Value, Beginning of Year / Period | | $ | 23.48 | | | $ | 23.87 | | | $ | 20.01 | | | $ | 15.63 | | | $ | 16.39 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.03 | | | | 0.01 | | | | 0.02 | | | | 0.03 | | | | 0.07 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.38 | ) | | | 0.85 | | | | 4.89 | | | | 4.38 | | | | (0.01 | ) |
| Total from Investment Operations | | $ | (1.35 | ) | | $ | 0.86 | | | $ | 4.91 | | | $ | 4.41 | | | $ | 0.06 | |
| | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.02 | ) | | | (0.08 | ) | | | (0.11 | ) | | | (0.03 | ) | | | (0.11 | ) |
| from Net Realized Gains | | | (0.45 | ) | | | (1.17 | ) | | | (0.94 | ) | | | — | | | | (0.71 | ) |
| Total Distributions to Shareholders | | $ | (0.47 | ) | | $ | (1.25 | ) | | $ | (1.05 | ) | | $ | (0.03 | ) | | $ | (0.82 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | | | | — | (e) | | | — | | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 21.66 | | | $ | 23.48 | | | $ | 23.87 | | | $ | 20.01 | | | $ | 15.63 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (5.76 | )%(b) | | | 3.61 | % | | | 24.83 | % | | | 28.28 | % | | | 0.90 | %(b) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 52,265 | | | $ | 58,583 | | | $ | 21,416 | | | $ | 15,764 | | | $ | 418 | |
| | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.23 | %(c) | | | 0.03 | % | | | 0.11 | % | | | 0.75 | % | | | 0.44 | %(c) |
| Net Expenses | | | 1.38 | %(c) | | | 1.38 | % | | | 1.40 | % | | | 1.44 | % | | | 1.39 | %(c) |
| Gross Expenses(d) | | | 1.38 | %(c) | | | 1.38 | % | | | 1.40 | % | | | 1.44 | % | | | 1.39 | %(c) |
| Portfolio Turnover Rate | | | 15 | %(b) | | | 26 | % | | | 30 | % | | | 34 | % | | | 36 | %(f) |
| (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) | Reflects portfolio turnover at the Fund level for the year ended June 30, 2012. |
| (g) | 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.
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each period.
BROWN ADVISORY MULTI-STRATEGY FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015(f) | |
| Net Asset Value, Beginning of Period | | $ | 10.07 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income (Loss)(a) | | | 0.05 | | | | (0.05 | ) |
| Net Realized And Unrealized Gains | | | (0.34 | ) | | | 0.17 | |
| Total from Investment Operations | | $ | (0.29 | ) | | $ | 0.12 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.03 | ) | | | (0.05 | ) |
| from Net Realized Gains | | | (0.07 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.10 | ) | | $ | (0.05 | ) |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.68 | | | $ | 10.07 | |
| | | | | | | | | |
| Total Return | | | (2.83 | )%(b) | | | 1.23 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 2,951 | | | $ | 2,319 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income (Loss)(g) | | | 1.10 | %(c) | | | (0.67 | )%(c) |
| Net Expenses | | | 1.10 | %(c) | | | 1.44 | %(c)(e) |
| Gross Expenses(d)(h) | | | 2.10 | %(c) | | | 3.05 | %(c) |
| Portfolio Turnover Rate | | | 0 | %(b) | | | 53 | %(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) | Effective May 7, 2015, the Fund lowered its expense cap from 1.60% to 1.10%. For the period from May 7, 2015 to June 30, 2015, the net expense ratio was 1.10%. |
| (f) | Commenced operations on October 31, 2014. The information presented is for the period from October 31, 2014 to June 30, 2015. |
| (g) | The Net Investment Income (Loss) ratio includes income actually earned and received by the Fund from the dividend distributions made to it by the underlying investment companies in which it invests, as disclosed on the Statement of Operations and in further detail within the “Investments in Affiliates – Multi-Strategy Fund” section of Note 3. The Net Investment Income (Loss) ratio does not include any other pro-rata amounts of the net investment income of the underlying investment companies in which it invests. |
| (h) | The Gross and Net Expense ratios include the actual gross and net expenses incurred by the Fund as disclosed on the Statement of Operations. The Gross and Net Expense ratios do not include any other pro-rata amounts of expenses incurred by the underlying investment companies in which the Fund invests (known as acquired Fund Fees and Expenses). |
The accompanying notes are an integral part of these financial statements.
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout the period.
BROWN ADVISORY GLOBAL LEADERS FUND
INVESTOR SHARES*
| | | Period Ended | |
| | | December 31, | |
| | | 2015(e) | |
| | | (Unaudited) | |
| Net Asset Value, Beginning of Period | | $ | 10.00 | |
| | | | | |
| Net Investment Income(a) | | | 0.01 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.12 | ) |
| Total from Investment Operations | | $ | (0.11 | ) |
| | | | | |
| Redemption fees(a) | | | — | |
| | | | | |
| Net Asset Value, End of Period | | $ | 9.89 | |
| | | | | |
| Total Return | | | (1.10 | )%(b) |
| | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 19,048 | |
| | | | | |
| Ratios to Average Net Assets: | | | | |
| Net Investment Income | | | 0.15 | %(c) |
| Net Expenses | | | 0.85 | %(c) |
| Gross Expenses(d) | | | 2.10 | %(c) |
| Portfolio Turnover Rate | | | 49 | %(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 July 1, 2015. The information presented is for the period from July 1, 2015 (end of day) to December 31, 2015. |
The accompanying notes are an integral part of these financial statements.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.63 | | | $ | 10.74 | | | $ | 10.85 | | | $ | 11.37 | | | $ | 11.28 | | | $ | 11.23 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.11 | | | | 0.19 | | | | 0.17 | | | | 0.19 | | | | 0.24 | | | | 0.31 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.06 | ) | | | (0.08 | ) | | | 0.12 | | | | (0.26 | ) | | | 0.36 | | | | 0.11 | |
| Total from Investment Operations | | $ | 0.05 | | | $ | 0.11 | | | $ | 0.29 | | | $ | (0.07 | ) | | $ | 0.60 | | | $ | 0.42 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.11 | ) | | | (0.22 | ) | | | (0.18 | ) | | | (0.25 | ) | | | (0.25 | ) | | | (0.33 | ) |
| from Net Realized Gains | | | (0.06 | ) | | | — | | | | (0.22 | ) | | | (0.20 | ) | | | (0.26 | ) | | | (0.04 | ) |
| Total Distributions to Shareholders | | $ | (0.17 | ) | | $ | (0.22 | ) | | $ | (0.40 | ) | | $ | (0.45 | ) | | $ | (0.51 | ) | | $ | (0.37 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.51 | | | $ | 10.63 | | | $ | 10.74 | | | $ | 10.85 | | | $ | 11.37 | | | $ | 11.28 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 0.41 | %(b) | | | 1.01 | % | | | 2.66 | % | | | (0.72 | )% | | | 5.42 | % | | | 3.84 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 141,574 | | | $ | 140,006 | | | $ | 207,371 | | | $ | 241,543 | | | $ | 292,556 | | | $ | 255,847 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(f) | | | 1.97 | %(c) | | | 1.78 | % | | | 1.54 | % | | | 1.66 | % | | | 2.15 | % | | | 2.75 | % |
| Net Expenses(g) | | | 0.44 | %(c) | | | 0.45 | % | | | 0.52 | % | | | 0.52 | % | | | 0.50 | % | | | 0.52 | % |
| Gross Expenses(d)(g) | | | 0.51 | %(c) | | | 0.50 | % | | | 0.52 | % | | | 0.52 | % | | | 0.50 | % | | | 0.52 | % |
| Portfolio Turnover Rate | | | 49 | %(b) | | | 130 | % | | | 162 | % | | | 111 | % | | | 75 | % | | | 84 | % |
| (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) | The Net Investment Income ratio includes income actually earned by the Fund from its investments in fixed income securities as well as from dividend distributions made to it by the underlying investment companies in which it invests, as disclosed on the Statement of Operations and in further detail within the “Investments in Affiliates - Intermediate Income Fund” section of Note 3. The Net Investment Income ratio does not include any other pro-rata amounts of the net investment income of the underlying investment companies in which it invests. |
| (g) | The Gross and Net Expense ratios include the actual gross and net expenses incurred by the Fund as disclosed on the Statement of Operations. The Gross and Net Expense ratios do not include any other pro-rata amounts of expenses incurred by the underlying investment companies in which the Fund invests (known as Acquired Fund Fees and Expenses). For further details regarding the expenses waived in this fund, refer to the “Investments in Affiliates - Intermediate Income Fund” section of Note 3. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.42 | | | $ | 10.53 | | | $ | 10.65 | | | $ | 11.16 | | | $ | 11.08 | | | $ | 11.04 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.09 | | | | 0.16 | | | | 0.14 | | | | 0.16 | | | | 0.22 | | | | 0.28 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.05 | ) | | | (0.08 | ) | | | 0.11 | | | | (0.25 | ) | | | 0.35 | | | | 0.11 | |
| Total from Investment Operations | | $ | 0.04 | | | $ | 0.08 | | | $ | 0.25 | | | $ | (0.09 | ) | | $ | 0.57 | | | $ | 0.39 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.09 | ) | | | (0.19 | ) | | | (0.15 | ) | | | (0.22 | ) | | | (0.23 | ) | | | (0.31 | ) |
| from Net Realized Gains | | | (0.06 | ) | | | — | | | | (0.22 | ) | | | (0.20 | ) | | | (0.26 | ) | | | (0.04 | ) |
| Total Distributions to Shareholders | | $ | (0.15 | ) | | $ | (0.19 | ) | | $ | (0.37 | ) | | $ | (0.42 | ) | | $ | (0.49 | ) | | $ | (0.35 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | | | | — | (f) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.31 | | | $ | 10.42 | | | $ | 10.53 | | | $ | 10.65 | | | $ | 11.16 | | | $ | 11.08 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return(b) | | | 0.39 | %(c) | | | 0.78 | % | | | 2.36 | % | | | (0.87 | )% | | | 5.21 | % | | | 3.60 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 9,097 | | | $ | 9,608 | | | $ | 12,613 | | | $ | 16,149 | | | $ | 19,540 | | | $ | 22,647 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(g) | | | 1.72 | %(d) | | | 1.53 | % | | | 1.29 | % | | | 1.43 | % | | | 1.94 | % | | | 2.54 | % |
| Net Expenses(h) | | | 0.69 | %(d) | | | 0.70 | % | | | 0.77 | % | | | 0.75 | % | | | 0.71 | % | | | 0.72 | % |
| Gross Expenses(e)(h) | | | 0.76 | %(d) | | | 0.75 | % | | | 0.77 | % | | | 0.75 | % | | | 0.71 | % | | | 0.72 | % |
| Portfolio Turnover Rate | | | 49 | %(c) | | | 130 | % | | | 162 | % | | | 111 | % | | | 75 | % | | | 84 | % |
| (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 year ended June 30, 2011. |
| (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) | The Net Investment Income ratio includes income actually earned by the Fund from its investments in fixed income securities as well as from dividend distributions made to it by the underlying investment companies in which it invests, as disclosed on the Statement of Operations and in further detail within the “Investments in Affiliates – Intermediate Income Fund” section of Note 3. The Net Investment Income ratio does not include any other pro-rata amounts of the net investment income of the underlying investment companies in which it invests. |
| (h) | The Gross and Net Expense ratios include the actual gross and net expenses incurred by the Fund as disclosed on the Statement of Operations. The Gross and Net Expense ratios do not include any other pro-rata amounts of expenses incurred by the underlying investment companies in which the Fund invests (known as Acquired Fund Fees and Expenses). For further details regarding the expenses waived in this fund, refer to the “Investments in Affiliates – Intermediate Income Fund” section of Note 3. |
| * | Prior to July 1, 2011, Advisor Shares were known as A Shares. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each period.
BROWN ADVISORY TOTAL RETURN FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015(e) | |
| Net Asset Value, Beginning of Period | | $ | 9.83 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income(a) | | | 0.13 | | | | 0.13 | |
| Net Realized And Unrealized Losses | | | (0.05 | ) | | | (0.19 | ) |
| Total from Investment Operations | | $ | 0.08 | | | $ | (0.06 | ) |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.14 | ) | | | (0.11 | ) |
| Total Distributions to Shareholders | | $ | (0.14 | ) | | $ | (0.11 | ) |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.77 | | | $ | 9.83 | |
| | | | | | | | | |
| Total Return | | | 0.84 | %(b) | | | (0.60 | )%(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 76,642 | | | $ | 73,735 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income | | | 2.66 | %(c) | | | 1.89 | %(c) |
| Net Expenses | | | 0.51 | %(c) | | | 0.54 | %(c) |
| Gross Expenses(d) | | | 0.51 | %(c) | | | 0.54 | %(c) |
| Portfolio Turnover Rate | | | 115 | %(b) | | | 235 | %(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 June 30, 2015. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each period.
BROWN ADVISORY TOTAL RETURN FUND
INVESTOR SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015(e) | |
| Net Asset Value, Beginning of Period | | $ | 9.83 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income(a) | | | 0.13 | | | | 0.12 | |
| Net Realized And Unrealized Losses | | | (0.05 | ) | | | (0.18 | ) |
| Total from Investment Operations | | $ | 0.08 | | | $ | (0.06 | ) |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.14 | ) | | | (0.11 | ) |
| Total Distributions to Shareholders | | $ | (0.14 | ) | | $ | (0.11 | ) |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.77 | | | $ | 9.83 | |
| | | | | | | | | |
| Total Return | | | 0.81 | %(b) | | | (0.63 | )%(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 1,464 | | | $ | 9,081 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income | | | 2.61 | %(c) | | | 1.84 | %(c) |
| Net Expenses | | | 0.56 | %(c) | | | 0.59 | %(c) |
| Gross Expenses(d) | | | 0.56 | %(c) | | | 0.59 | %(c) |
| Portfolio Turnover Rate | | | 115 | %(b) | | | 235 | %(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 June 30, 2015. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights
These financial highlights reflect selected per share data and ratios for a share outstanding of the Fund throughout each period.
BROWN ADVISORY STRATEGIC BOND FUND
INVESTOR SHARES
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015(f) | |
| Net Asset Value, Beginning of Period | | $ | 9.83 | | | $ | 10.07 | |
| | | | | | | | | |
| Net Investment Income(a) | | | 0.17 | | | | 0.16 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.29 | ) | | | (0.35 | ) |
| Total from Investment Operations | | $ | (0.12 | ) | | $ | (0.19 | ) |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Net Investment Income | | | (0.33 | ) | | | (0.05 | ) |
| Total Distributions to Shareholders | | $ | (0.33 | ) | | $ | (0.05 | ) |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.38 | | | $ | 9.83 | |
| | | | | | | | | |
| Total Return | | | (1.22 | )%(b) | | | (1.85 | )%(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 43,857 | | | $ | 59,680 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income | | | 3.51 | %(c) | | | 2.42 | %(c) |
| Net Expenses | | | 0.70 | %(c) | | | 0.70 | %(c) |
| Gross Expenses(d) | | | 0.72 | %(c) | | | 0.72 | %(c) |
| Portfolio Turnover Rate | | | 107 | %(b) | | | 317 | %(e) |
| (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) | Reflects portfolio turnover at the Fund level for the year ended June 30, 2015. |
| (f) | Commenced operations on October 31, 2014. The information presented is for the period from October 31, 2014 to June 30, 2015. |
The accompanying notes are an integral part of these financial statements.
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 STRATEGIC BOND FUND
ADVISOR SHARES
| | | Six Months | | | | | | | | | | | | | |
| | | Ended | | | | | | | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012(g) | |
| Net Asset Value, Beginning of Year / Period | | $ | 9.82 | | | $ | 10.04 | | | $ | 9.68 | | | $ | 9.68 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | 0.16 | | | | 0.19 | | | | (0.01 | ) | | | (0.09 | ) | | | (0.04 | ) |
| Net Realized And Unrealized Gains (Losses) | | | (0.30 | ) | | | (0.37 | ) | | | 0.42 | | | | 0.29 | | | | (0.27 | ) |
| Total from Investment Operations | | $ | (0.14 | ) | | $ | (0.18 | ) | | $ | 0.41 | | | $ | 0.20 | | | $ | (0.31 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.30 | ) | | | (0.04 | ) | | | (0.05 | ) | | | (0.20 | ) | | | (0.01 | ) |
| Total Distributions to Shareholders | | $ | (0.30 | ) | | $ | (0.04 | ) | | $ | (0.05 | ) | | $ | (0.20 | ) | | $ | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | (e) | | | — | (e) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 9.38 | | | $ | 9.82 | | | $ | 10.04 | | | $ | 9.68 | | | $ | 9.68 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | (1.43 | )%(b) | | | (1.80 | )% | | | 4.22 | % | | | 2.09 | % | | | (3.09 | )%(b) |
| | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 864 | | | $ | 1,692 | | | $ | 24,399 | | | $ | 25,570 | | | $ | 29,541 | |
| | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | 3.26 | %(c) | | | 1.91 | % | | | (0.07 | )% | | | (0.87 | )% | | | (0.56 | )%(c) |
| Net Expenses | | | 0.95 | %(c) | | | 1.21 | %(f) | | | 1.33 | % | | | 1.40 | % | | | 1.40 | %(c) |
| Gross Expenses(d) | | | 0.97 | %(c) | | | 1.22 | %(f) | | | 1.33 | % | | | 1.40 | % | | | 1.40 | %(c) |
| Portfolio Turnover Rate | | | 107 | %(b) | | | 317 | % | | | 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, 2015, the expense cap for this share class was lowered to 0.95%. For the period from October 31, 2014 to June 30, 2015, the net and gross expense ratios were 0.95% and 0.97%, 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.
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 Ended: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.65 | | | $ | 10.82 | | | $ | 10.81 | | | $ | 11.06 | | | $ | 10.85 | | | $ | 10.81 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.11 | | | | 0.18 | | | | 0.21 | | | | 0.21 | | | | 0.25 | | | | 0.25 | |
| Net Realized And Unrealized Gains (Losses) | | | 0.11 | | | | (0.12 | ) | | | 0.10 | | | | (0.23 | ) | | | 0.26 | | | | 0.04 | |
| Total from Investment Operations | | $ | 0.22 | | | $ | 0.06 | | | $ | 0.31 | | | $ | (0.02 | ) | | $ | 0.51 | | | $ | 0.29 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.11 | ) | | | (0.18 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.25 | ) | | | (0.25 | ) |
| from Net Realized Gains | | | (0.05 | ) | | | (0.05 | ) | | | (0.09 | ) | | | (0.02 | ) | | | (0.05 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.16 | ) | | $ | (0.23 | ) | | $ | (0.30 | ) | | $ | (0.23 | ) | | $ | (0.30 | ) | | $ | (0.25 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | | | | — | (e) | | | — | (e) | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.71 | | | $ | 10.65 | | | $ | 10.82 | | | $ | 10.81 | | | $ | 11.06 | | | $ | 10.85 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Return | | | 2.07 | %(b) | | | 0.58 | % | | | 2.94 | % | | | (0.25 | )% | | | 4.69 | % | | | 2.74 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 187,975 | | | $ | 199,469 | | | $ | 205,717 | | | $ | 252,166 | | | $ | 250,087 | | | $ | 188,180 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 2.00 | %(c) | | | 1.66 | % | | | 1.99 | % | | | 1.86 | % | | | 2.23 | % | | | 2.33 | % |
| Net Expenses | | | 0.49 | %(c) | | | 0.49 | % | | | 0.52 | % | | | 0.52 | % | | | 0.51 | % | | | 0.51 | % |
| Gross Expenses(d) | | | 0.49 | %(c) | | | 0.49 | % | | | 0.52 | % | | | 0.52 | % | | | 0.51 | % | | | 0.51 | % |
| Portfolio Turnover Rate | | | 66 | %(b) | | | 61 | % | | | 56 | % | | | 30 | % | | | 16 | % | | | 29 | % |
| (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. |
| * | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. |
The accompanying notes are an integral part of these financial statements.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013 | |
| Net Asset Value, Beginning of Year / Period | | $ | 9.93 | | | $ | 10.03 | | | $ | 9.84 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.11 | | | | 0.18 | | | | 0.19 | | | | 0.13 | |
| Net Realized And Unrealized Gains (Losses) | | | 0.11 | | | | (0.10 | ) | | | 0.19 | | | | (0.12 | ) |
| Total from Investment Operations | | $ | 0.22 | | | $ | 0.08 | | | $ | 0.38 | | | $ | 0.01 | |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.12 | ) | | | (0.18 | ) | | | (0.19 | ) | | | (0.13 | ) |
| from Net Realized Gains | | | — | | | | — | | | | —(e | ) | | | (0.04 | ) |
| Total Distributions to Shareholders | | $ | (0.12 | ) | | $ | (0.18 | ) | | $ | (0.19 | ) | | $ | (0.17 | ) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | | | | — | (e) |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.03 | | | $ | 9.93 | | | $ | 10.03 | | | $ | 9.84 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | 2.15 | %(b) | | | 0.78 | % | | | 3.94 | % | | | 0.03 | % |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 224,578 | | | $ | 224,154 | | | $ | 205,177 | | | $ | 161,891 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 2.24 | %(c) | | | 1.78 | % | | | 1.96 | % | | | 1.35 | % |
| Net Expenses | | | 0.49 | %(c) | | | 0.50 | % | | | 0.52 | % | | | 0.55 | % |
| Gross Expenses(d) | | | 0.49 | %(c) | | | 0.50 | % | | | 0.52 | % | | | 0.55 | % |
| Portfolio Turnover Rate | | | 90 | %(b) | | | 109 | % | | | 157 | % | | | 87 | % |
| (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. |
| * | 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.
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 MORTGAGE SECURITIES FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year Ended: | |
| | | 2015 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014(e) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.06 | | | $ | 10.16 | | | $ | 10.15 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.11 | | | | 0.27 | | | | 0.03 | |
| Net Realized And Unrealized Gains | | | — | | | | 0.01 | | | | 0.02 | |
| Total from Investment Operations | | $ | 0.11 | | | $ | 0.28 | | | $ | 0.05 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.13 | ) | | | (0.30 | ) | | | (0.04 | ) |
| from Realized Gains | | | (0.04 | ) | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.17 | ) | | $ | (0.38 | ) | | $ | (0.04 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.00 | | | $ | 10.06 | | | $ | 10.16 | |
| | | | | | | | | | | | | |
| Total Return | | | 1.04 | %(b) | | | 2.74 | % | | | 0.49 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 334,930 | | | $ | 206,299 | | | $ | 131,415 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 2.17 | %(c) | | | 2.68 | % | | | 1.98 | %(c) |
| Net Expenses | | | 0.45 | %(c) | | | 0.47 | % | | | 0.52 | %(c) |
| Gross Expenses(d) | | | 0.45 | %(c) | | | 0.47 | % | | | 0.52 | %(c) |
| Portfolio Turnover Rate | | | 86 | %(b) | | | 147 | % | | | 88 | %(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 May 13, 2014. The information presented is for the period from May 13, 2014 to June 30, 2014. |
The accompanying notes are an integral part of these financial statements.
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 MORTGAGE SECURITIES FUND
INVESTOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year Ended: | |
| | | 2015 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014(e) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.06 | | | $ | 10.16 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.11 | | | | 0.27 | | | | 0.10 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.01 | ) | | | — | | | | 0.16 | |
| Total from Investment Operations | | $ | 0.10 | | | $ | 0.27 | | | $ | 0.26 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.12 | ) | | | (0.29 | ) | | | (0.10 | ) |
| from Realized Gains | | | (0.04 | ) | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.16 | ) | | $ | (0.37 | ) | | $ | (0.10 | ) |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.00 | | | $ | 10.06 | | | $ | 10.16 | |
| | | | | | | | | | | | | |
| Total Return | | | 0.98 | %(b) | | | 2.68 | % | | | 2.62 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 1,710 | | | $ | 28,649 | | | $ | 67,776 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 2.12 | %(c) | | | 2.63 | % | | | 1.93 | %(c) |
| Net Expenses | | | 0.50 | %(c) | | | 0.52 | % | | | 0.57 | %(c) |
| Gross Expenses(d) | | | 0.50 | %(c) | | | 0.52 | % | | | 0.57 | %(c) |
| Portfolio Turnover Rate | | | 86 | %(b) | | | 147 | % | | | 88 | %(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 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.
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 – WMC STRATEGIC EUROPEAN EQUITY FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year Ended: | |
| | | 2015 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.20 | | | $ | 10.46 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | 0.14 | | | | 0.14 | |
| Net Realized And Unrealized Gains (Losses) | | | — | | | | (0.29 | ) | | | 0.32 | |
| Total from Investment Operations | | $ | (0.01 | ) | | $ | (0.15 | ) | | $ | 0.46 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.03 | ) | | | (0.11 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.03 | ) | | $ | (0.11 | ) | | $ | — | |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.16 | | | $ | 10.20 | | | $ | 10.46 | |
| | | | | | | | | | | | | |
| Total Return | | | (0.13 | )%(b) | | | (1.42 | )% | | | 4.60 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 1,113,788 | | | $ | 240,182 | | | $ | 202,616 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | (0.19 | )%(c) | | | 1.35 | % | | | 2.01 | %(c) |
| Net Expenses | | | 1.07 | %(c) | | | 1.13 | % | | | 1.23 | %(c) |
| Gross Expenses(d) | | | 1.07 | %(c) | | | 1.13 | % | | | 1.23 | %(c) |
| Portfolio Turnover Rate | | | 14 | %(b) | | | 48 | % | | | 25 | %(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 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.
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 – WMC STRATEGIC EUROPEAN EQUITY FUND
INVESTOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2015 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.19 | | | $ | 10.45 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.02 | ) | | | 0.12 | | | | 0.13 | |
| Net Realized And Unrealized Gains (Losses) | | | — | | | | (0.29 | ) | | | 0.32 | |
| Total from Investment Operations | | $ | (0.02 | ) | | $ | (0.17 | ) | | $ | 0.45 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | — | | | | (0.09 | ) | | | — | |
| Total Distributions to Shareholders | | $ | — | | | $ | (0.09 | ) | | $ | — | |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.17 | | | $ | 10.19 | | | $ | 10.45 | |
| | | | | | | | | | | | | |
| Total Return | | | (0.20 | )%(b) | | | (1.56 | )% | | | 4.50 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 11,870 | | | $ | 25,840 | | | $ | 18,011 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | (0.34 | )%(c) | | | 1.20 | % | | | 1.86 | %(c) |
| Net Expenses | | | 1.22 | %(c) | | | 1.28 | % | | | 1.38 | %(c) |
| Gross Expenses(d) | | | 1.22 | %(c) | | | 1.28 | % | | | 1.38 | %(c) |
| Portfolio Turnover Rate | | | 14 | %(b) | | | 48 | % | | | 25 | %(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 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.
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 – WMC STRATEGIC EUROPEAN EQUITY FUND
ADVISOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2015 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 10.17 | | | $ | 10.44 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.03 | ) | | | 0.10 | | | | 0.11 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.01 | ) | | | (0.29 | ) | | | 0.33 | |
| Total from Investment Operations | | $ | (0.04 | ) | | $ | (0.19 | ) | | $ | 0.44 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | — | | | | (0.08 | ) | | | — | |
| Total Distributions to Shareholders | | $ | — | | | $ | (0.08 | ) | | $ | — | |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.13 | | | $ | 10.17 | | | $ | 10.44 | |
| | | | | | | | | | | | | |
| Total Return | | | (0.39 | )%(b) | | | (1.78 | )% | | | 4.40 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 924 | | | $ | 1,076 | | | $ | 240 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | (0.59 | )%(c) | | | 0.95 | % | | | 1.61 | %(c) |
| Net Expenses | | | 1.47 | %(c) | | | 1.53 | % | | | 1.63 | %(c) |
| Gross Expenses(d) | | | 1.47 | %(c) | | | 1.53 | % | | | 1.63 | %(c) |
| Portfolio Turnover Rate | | | 14 | %(b) | | | 48 | % | | | 25 | %(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 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.
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 – WMC JAPAN ALPHA OPPORTUNITIES FUND
INSTITUTIONAL SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2015 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 12.83 | | | $ | 10.50 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | 0.01 | | | | 0.05 | | | | 0.05 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.81 | ) | | | 2.86 | | | | 0.45 | |
| Total from Investment Operations | | $ | (0.80 | ) | | $ | 2.91 | | | $ | 0.50 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.95 | ) | | | (0.51 | ) | | | — | |
| from Realized Gains | | | (0.20 | ) | | | (0.07 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (1.15 | ) | | $ | (0.58 | ) | | $ | — | |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | (e) | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.88 | | | $ | 12.83 | | | $ | 10.50 | |
| | | | | | | | | | | | | |
| Total Return | | | (6.37 | )%(b) | | | 28.62 | % | | | 5.00 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 2,165,449 | | | $ | 1,582,214 | | | $ | 1,080,717 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income | | | 0.21 | %(c) | | | 0.41 | % | | | 1.59 | %(c) |
| Net Expenses | | | 1.14 | %(c) | | | 1.15 | % | | | 1.21 | %(c) |
| Gross Expenses(d) | | | 1.14 | %(c) | | | 1.15 | % | | | 1.21 | %(c) |
| Portfolio Turnover Rate | | | 47 | %(b) | | | 70 | % | | | 26 | %(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 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.
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 – WMC JAPAN ALPHA OPPORTUNITIES FUND
INVESTOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2015 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 12.82 | | | $ | 10.49 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | — | | | | 0.03 | | | | 0.05 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.81 | ) | | | 2.87 | | | | 0.44 | |
| Total from Investment Operations | | $ | (0.81 | ) | | $ | 2.90 | | | $ | 0.49 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.94 | ) | | | (0.50 | ) | | | — | |
| from Realized Gains | | | (0.20 | ) | | | (0.07 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (1.14 | ) | | $ | (0.57 | ) | | $ | — | |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | (e) | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.87 | | | $ | 12.82 | | | $ | 10.49 | |
| | | | | | | | | | | | | |
| Total Return | | | (6.48 | )%(b) | | | 28.57 | % | | | 4.90 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 35,371 | | | $ | 25,628 | | | $ | 4,522 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | 0.06 | %(c) | | | 0.26 | % | | | 1.44 | %(c) |
| Net Expenses | | | 1.29 | %(c) | | | 1.30 | % | | | 1.36 | %(c) |
| Gross Expenses(d) | | | 1.29 | %(c) | | | 1.30 | % | | | 1.36 | %(c) |
| Portfolio Turnover Rate | | | 47 | %(b) | | | 70 | % | | | 26 | %(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 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.
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 – WMC JAPAN ALPHA OPPORTUNITIES FUND
ADVISOR SHARES
| | | Six Months | | | | | | | |
| | | Ended | | | | | | | |
| | | December 31, | | | Year / Period Ended: | |
| | | 2015 | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014(e) | |
| Net Asset Value, Beginning of Year / Period | | $ | 12.79 | | | $ | 10.48 | | | $ | 10.00 | |
| | | | | | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | — | | | | 0.04 | |
| Net Realized And Unrealized Gains (Losses) | | | (0.82 | ) | | | 2.87 | | | | 0.44 | |
| Total from Investment Operations | | $ | (0.83 | ) | | $ | 2.87 | | | $ | 0.48 | |
| | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | |
| from Net Investment Income | | | (0.92 | ) | | | (0.49 | ) | | | — | |
| from Realized Gains | | | (0.20 | ) | | | (0.07 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (1.12 | ) | | $ | (0.56 | ) | | $ | — | |
| | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 10.84 | | | $ | 12.79 | | | $ | 10.48 | |
| | | | | | | | | | | | | |
| Total Return | | | (6.65 | )%(b) | | | 28.22 | % | | | 4.80 | %(b) |
| | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 1,310 | | | $ | 1,670 | | | $ | 59 | |
| | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | |
| Net Investment Income (Loss) | | | (0.19 | )%(c) | | | 0.01 | % | | | 1.19 | %(c) |
| Net Expenses | | | 1.54 | %(c) | | | 1.55 | % | | | 1.61 | %(c) |
| Gross Expenses(d) | | | 1.54 | %(c) | | | 1.55 | % | | | 1.61 | %(c) |
| Portfolio Turnover Rate | | | 47 | %(b) | | | 70 | % | | | 26 | %(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 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.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 9.74 | | | $ | 10.22 | | | $ | 9.52 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.04 | | | | 0.13 | | | | 0.20 | | | | 0.12 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.44 | ) | | | (0.46 | ) | | | 0.61 | | | | (0.60 | ) |
| Total from Investment Operations | | $ | (1.40 | ) | | $ | (0.33 | ) | | $ | 0.81 | | | $ | (0.48 | ) |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.09 | ) | | | (0.15 | ) | | | (0.11 | ) | | | — | (e) |
| Total Distributions to Shareholders | | $ | (0.09 | ) | | $ | (0.15 | ) | | $ | (0.11 | ) | | $ | — | (e) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | (e) |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 8.25 | | | $ | 9.74 | | | $ | 10.22 | | | $ | 9.52 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | (14.39 | )%(b) | | | (3.22 | )% | | | 8.62 | % | | | (4.77 | )%(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 201,671 | | | $ | 268,530 | | | $ | 193,676 | | | $ | 122,515 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.94 | %(c) | | | 1.31 | % | | | 2.08 | % | | | 2.17 | %(c) |
| Net Expenses | | | 1.19 | %(c) | | | 1.22 | % | | | 1.25 | % | | | 1.41 | %(c) |
| Gross Expenses(d) | | | 1.19 | %(c) | | | 1.22 | % | | | 1.25 | % | | | 1.41 | %(c) |
| Portfolio Turnover Rate | | | 15 | %(b) | | | 22 | % | | | 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.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 9.73 | | | $ | 10.21 | | | $ | 9.51 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.04 | | | | 0.11 | | | | 0.19 | | | | 0.11 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.45 | ) | | | (0.45 | ) | | | 0.61 | | | | (0.60 | ) |
| Total from Investment Operations | | $ | (1.41 | ) | | $ | (0.34 | ) | | $ | 0.80 | | | $ | (0.49 | ) |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.08 | ) | | | (0.14 | ) | | | (0.10 | ) | | | — | (e) |
| Total Distributions to Shareholders | | $ | (0.08 | ) | | $ | (0.14 | ) | | $ | (0.10 | ) | | $ | — | (e) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 8.24 | | | $ | 9.73 | | | $ | 10.21 | | | $ | 9.51 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | (14.48 | )%(b) | | | (3.33 | )% | | | 8.51 | % | | | (4.87 | )%(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 171,425 | | | $ | 155,919 | | | $ | 24,291 | | | $ | 11,695 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.79 | %(c) | | | 1.16 | % | | | 1.93 | % | | | 2.02 | %(c) |
| Net Expenses | | | 1.34 | %(c) | | | 1.37 | % | | | 1.40 | % | | | 1.56 | %(c) |
| Gross Expenses(d) | | | 1.34 | %(c) | | | 1.37 | % | | | 1.40 | % | | | 1.56 | %(c) |
| Portfolio Turnover Rate | | | 15 | %(b) | | | 22 | % | | | 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.
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: | |
| | | 2015 | | | June 30, | | | June 30, | | | June 30, | |
| | | (Unaudited) | | | 2015 | | | 2014 | | | 2013(f) | |
| Net Asset Value, Beginning of Year / Period | | $ | 9.70 | | | $ | 10.18 | | | $ | 9.49 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | |
| Net Investment Income(a) | | | 0.02 | | | | 0.09 | | | | 0.16 | | | | 0.10 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.43 | ) | | | (0.46 | ) | | | 0.61 | | | | (0.61 | ) |
| Total from Investment Operations | | $ | (1.41 | ) | | $ | (0.37 | ) | | $ | 0.77 | | | $ | (0.51 | ) |
| | | | | | | | | | | | | | | | | |
| Distributions: | | | | | | | | | | | | | | | | |
| from Net Investment Income | | | (0.02 | ) | | | (0.11 | ) | | | (0.08 | ) | | | — | (e) |
| Total Distributions to Shareholders | | $ | (0.02 | ) | | $ | (0.11 | ) | | $ | (0.08 | ) | | $ | — | (e) |
| | | | | | | | | | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | |
| Net Asset Value, End of Year / Period | | $ | 8.27 | | | $ | 9.70 | | | $ | 10.18 | | | $ | 9.49 | |
| | | | | | | | | | | | | | | | | |
| Total Return | | | (14.57 | )%(b) | | | (3.60 | )% | | | 8.19 | % | | | (5.07 | )%(b) |
| | | | | | | | | | | | | | | | | |
| Net Assets at End of Year / Period (000’s Omitted) | | $ | 374 | | | $ | 942 | | | $ | 533 | | | $ | 990 | |
| | | | | | | | | | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | | | | | | | | | |
| Net Investment Income | | | 0.54 | %(c) | | | 0.91 | % | | | 1.68 | % | | | 1.77 | %(c) |
| Net Expenses | | | 1.59 | %(c) | | | 1.62 | % | | | 1.65 | % | | | 1.81 | %(c) |
| Gross Expenses(d) | | | 1.59 | %(c) | | | 1.62 | % | | | 1.65 | % | | | 1.81 | %(c) |
| Portfolio Turnover Rate | | | 15 | %(b) | | | 22 | % | | | 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.
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
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015(e) | |
| Net Asset Value, Beginning of Period | | $ | 11.70 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.01 | ) | | | 0.02 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.53 | ) | | | 1.68 | |
| Total from Investment Operations | | $ | (1.54 | ) | | $ | 1.70 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Realized Gains | | | (0.42 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.42 | ) | | $ | — | |
| | | | | | | | | |
| Redemption fees(a) | | | — | | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.74 | | | $ | 11.70 | |
| | | | | | | | | |
| Total Return | | | (13.17 | )%(b) | | | 17.00 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 200,614 | | | $ | 187,901 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income (Loss) | | | (0.28 | )%(c) | | | 0.27 | %(c) |
| Net Expenses | | | 1.53 | %(c) | | | 1.83 | %(c) |
| Gross Expenses(d) | | | 1.53 | %(c) | | | 1.83 | %(c) |
| Portfolio Turnover Rate | | | 52 | %(b) | | | 89 | %(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 June 30, 2015. |
The accompanying notes are an integral part of these financial statements.
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
| | | Six Months | | | | |
| | | Ended | | | | |
| | | December 31, | | | Period Ended | |
| | | 2015 | | | June 30, | |
| | | (Unaudited) | | | 2015(f) | |
| Net Asset Value, Beginning of Period | | $ | 11.69 | | | $ | 10.00 | |
| | | | | | | | | |
| Net Investment Income (Loss)(a) | | | (0.02 | ) | | | 0.01 | |
| Net Realized And Unrealized Gains (Losses) | | | (1.53 | ) | | | 1.68 | |
| Total from Investment Operations | | $ | (1.55 | ) | | $ | 1.69 | |
| | | | | | | | | |
| Distributions: | | | | | | | | |
| from Realized Gains | | | (0.42 | ) | | | — | |
| Total Distributions to Shareholders | | $ | (0.42 | ) | | $ | — | |
| | | | | | | | | |
| Redemption fees(a) | | | — | (e) | | | — | |
| | | | | | | | | |
| Net Asset Value, End of Period | | $ | 9.72 | | | $ | 11.69 | |
| | | | | | | | | |
| Total Return | | | (13.26 | )%(b) | | | 16.90 | %(b) |
| | | | | | | | | |
| Net Assets at End of Period (000’s Omitted) | | $ | 6,768 | | | $ | 18,992 | |
| | | | | | | | | |
| Ratios to Average Net Assets: | | | | | | | | |
| Net Investment Income (Loss) | | | (0.43 | )%(c) | | | 0.12 | %(c) |
| Net Expenses | | | 1.68 | %(c) | | | 1.98 | %(c) |
| Gross Expenses(d) | | | 1.68 | %(c) | | | 1.98 | %(c) |
| Portfolio Turnover Rate | | | 52 | %(b) | | | 89 | %(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) | Less than $0.01 per share. |
| (f) | Commenced operations on November 21, 2014. The information presented is for the period from November 21, 2014 to June 30, 2015. |
The accompanying notes are an integral part of these financial statements.
Notes to Financial StatementsDecember 31, 2015 (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 Multi-Strategy Fund (“Multi-Strategy Fund”), Brown Advisory Global Leaders Fund (“Global Leaders 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, Global Leaders 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, Global Leaders 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 | | |
| Multi-Strategy Fund | 10/31/2014 | | | — | | | — | | |
| Global Leaders Fund | — | | | 7/1/2015 | | | — | | |
| 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 | | | — | | |
| * | | 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, 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.
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
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 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. Global Leaders Fund seeks to achieve capital appreciation by investing primarily in global equities. 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 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
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
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. Such options are typically categorized as Level 2.
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, 2015, the Small-Cap Growth Fund was the only fund that held any fair valued securities. As of December 31, 2015, the Small-Cap Growth Fund held fair valued securities with a total market value of $2,652,256 or 1.0% of total net assets.
The following is a summary of inputs used to value the Funds’ investments as of December 31, 2015:
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Growth Equity Fund | | | | | | | | | |
| Common Stocks | | $ | 2,293,973,517 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 79,083,562 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 2,373,057,079 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Value Equity Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 114,135,531 | | | $ | — | | | $ | — | |
| Real Estate Investment Trusts | | | 3,071,422 | | | | — | | | | — | |
| Short-Term Investments | | | 2,462,474 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 119,669,427 | | | $ | — | | | $ | — | |
Notes to Financial Statements
December 31, 2015 (Unaudited)
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Flexible Equity Fund | | | | | | | | | |
| Common Stocks | | $ | 287,460,124 | | | $ | — | | | $ | — | |
| Warrants | | | 409,800 | | | | — | | | | — | |
| Short-Term Investments | | | 12,849,594 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 300,719,518 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Equity Income Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 143,417,752 | | | $ | — | | | $ | — | |
| Preferred Stocks | | | 3,945,509 | | | | — | | | | — | |
| Real Estate Investment Trusts | | | 9,545,471 | | | | — | | | | — | |
| Short-Term Investments | | | 6,194,219 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 163,102,951 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Sustainable Growth Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 288,126,345 | | | $ | — | | | $ | — | |
| Real Estate Investment Trusts | | | 9,630,625 | | | | — | | | | — | |
| Short-Term Investments | | | 12,994,885 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 310,751,855 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Small-Cap Growth Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 256,787,801 | | | $ | — | | | $ | — | |
| Private Placements | | | — | | | | — | | | | 2,652,256 | |
| Short-Term Investments | | | 7,764,748 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 264,552,549 | | | $ | — | | | $ | 2,652,256 | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Small-Cap Fundamental Value Fund | | | | | | | | | | | | |
| Common Stocks | | $ | 796,129,080 | | | $ | — | | | $ | — | |
| Real Estate Investment Trusts | | | 24,921,007 | | | | — | | | | — | |
| Short-Term Investments | | | 20,504,913 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 841,555,000 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Multi-Strategy Fund | | | | | | | | | | | | |
| Affiliated Mutual Funds | | $ | 2,854,696 | | | $ | — | | | $ | — | |
| Short-Term Investments | | | 85,969 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 2,940,665 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Global Leaders Fund | | | | | | | | | | | | |
| Common Stocks: | | | | | | | | | | | | |
| China | | $ | — | | | $ | 488,367 | | | $ | — | |
| Denmark | | | 258,863 | | | | 361,979 | | | | — | |
| Germany | | | — | | | | 501,742 | | | | — | |
| Indonesia | | | — | | | | 188,314 | | | | — | |
| Japan | | | — | | | | 486,116 | | | | — | |
| Sweden | | | — | | | | 164,381 | | | | — | |
| Switzerland | | | — | | | | 120,872 | | | | — | |
| Taiwan | | | 590,703 | | | | — | | | | — | |
| United Kingdom | | | 249,665 | | | | 830,992 | | | | — | |
| United States | | | 12,685,778 | | | | — | | | | — | |
| Short-Term Investments | | | 2,229,379 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 16,014,388 | | | $ | 3,142,763 | | | $ | — | |
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Intermediate Income Fund | | | | | | | | | |
| Corporate Bonds & Notes | | $ | — | | | $ | 39,026,392 | | | $ | — | |
| Mortgage Backed Securities | | | — | | | | 16,719,696 | | | | — | |
| Asset Backed Securities | | | — | | | | 11,981,664 | | | | — | |
| Municipal Bonds | | | — | | | | 10,840,535 | | | | — | |
| U.S. Treasury Notes | | | — | | | | 29,812,273 | | | | — | |
| Affiliated Mutual Funds | | | 36,829,660 | | | | — | | | | — | |
| Short-Term Investments | | | 4,194,598 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 41,024,258 | | | $ | 108,380,560 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Total Return Fund | | | | | | | | | | | | |
| Mortgage Backed Securities | | $ | — | | | $ | 29,675,456 | | | $ | — | |
| Asset Backed Securities | | | — | | | | 27,067,814 | | | | — | |
| Corporate Bonds & Notes | | | — | | | | 22,618,921 | | | | — | |
| Municipal Bonds | | | — | | | | 1,202,628 | | | | — | |
| U.S. Treasury Notes | | | — | | | | 750,220 | | | | — | |
| Short-Term Investments | | | 2,867,377 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 2,867,377 | | | $ | 81,315,039 | | | $ | — | |
| Future Contracts – Long* | | $ | 97,330 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| * Unrealized Appreciation (Depreciation) | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Strategic Bond Fund | | | | | | | | | | | | |
| Asset Backed Securities | | $ | — | | | $ | 29,492,665 | | | $ | — | |
| Mortgage Backed Securities | | | — | | | | 17,908,491 | | | | — | |
| Corporate Bonds & Notes | | | — | | | | 8,606,204 | | | | — | |
| Municipal Bonds | | | — | | | | 1,725,924 | | | | — | |
| Mutual Funds | | | 949,630 | | | | — | | | | — | |
| Short-Term Investments | | | 298,747 | | | | 99,968 | | | | — | |
| Total Investments in Securities | | $ | 1,248,377 | | | $ | 57,833,252 | | | $ | — | |
| Future Contracts – Short* | | $ | 16,706 | | | $ | — | | | | — | |
| | | | | | | | | | | | | |
| * Unrealized Appreciation (Depreciation) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Maryland Bond Fund | | | | | | | | | | | | |
| Municipal Bonds | | $ | — | | | $ | 185,767,469 | | | $ | — | |
| Short-Term Investments | | | 1,467,561 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 1,467,561 | | | $ | 185,767,469 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Tax Exempt Bond Fund | | | | | | | | | | | | |
| Municipal Bonds | | $ | — | | | $ | 219,041,594 | | | $ | — | |
| Short-Term Investments | | | 2,779,809 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 2,779,809 | | | $ | 219,041,594 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Mortgage Securities Fund | | | | | | | | | | | | |
| Mortgage Backed Securities | | $ | — | | | $ | 332,239,861 | | | $ | — | |
| Asset Backed Securities | | | — | | | | 30,418,758 | | | | — | |
| Local Government Housing Agency Bonds | | | — | | | | 2,793,897 | | | | — | |
| Short-Term Investments | | | 26,954,466 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 26,954,466 | | | $ | 365,452,516 | | | $ | — | |
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Strategic European Equity Fund | | | | | | | | | |
| Common Stocks: | | | | | | | | | |
| Belgium | | $ | — | | | $ | 19,905,825 | | | $ | — | |
| Denmark | | | — | | | | 55,439,899 | | | | — | |
| Finland | | | — | | | | 53,071,208 | | | | — | |
| France | | | — | | | | 93,900,715 | | | | — | |
| Germany | | | — | | | | 101,931,777 | | | | — | |
| Italy | | | — | | | | 42,848,559 | | | | — | |
| Netherlands | | | — | | | | 43,247,264 | | | | — | |
| Spain | | | — | | | | 5,852,288 | | | | — | |
| Sweden | | | — | | | | 117,065,680 | | | | — | |
| Switzerland | | | 9,733,252 | | | | 209,579,183 | | | | — | |
| United Kingdom | | | 8,911,795 | | | | 340,766,002 | | | | — | |
| Short-Term Investments | | | 21,001,530 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 39,646,577 | | | $ | 1,083,608,400 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Japan Alpha Opportunities Fund | | | | | | | | | | | | |
| Common Stocks – Japan | | $ | 6,050,301 | | | $ | 2,079,802,982 | | | $ | — | |
| Short-Term Investments | | | 128,894,432 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 134,944,733 | | | $ | 2,079,802,982 | | | $ | — | |
| Forward Currency Exchange Contracts* | | | — | | | $ | (16,016,501 | ) | | $ | — | |
| Future Contracts – Long* | | $ | (945,626 | ) | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| * Unrealized Appreciation (Depreciation) | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Emerging Markets Fund | | | | | | | | | | | | |
| Common Stocks: | | | | | | | | | | | | |
| Brazil | | $ | — | | | $ | 11,228,673 | | | $ | — | |
| Chile | | | 14,934,457 | | | | 1,975,622 | | | | — | |
| China | | | — | | | | 14,559,773 | | | | — | |
| Hungary | | | — | | | | 19,674,954 | | | | — | |
| India | | | — | | | | 46,626,284 | | | | — | |
| Indonesia | | | — | | | | 5,977,660 | | | | — | |
| Philippines | | | — | | | | 28,585,826 | | | | — | |
| Poland | | | — | | | | 16,577,423 | | | | — | |
| Portugal | | | — | | | | 2,778,354 | | | | — | |
| South Africa | | | — | | | | 25,541,937 | | | | — | |
| South Korea | | | — | | | | 75,481,067 | | | | — | |
| Sweden | | | — | | | | 3,863,574 | | | | — | |
| Taiwan | | | — | | | | 37,120,323 | | | | — | |
| Thailand | | | 758,519 | | | | — | | | | — | |
| Turkey | | | 5,324,419 | | | | 23,242,815 | | | | — | |
| United Arab Emirates | | | 1,592,567 | | | | 10,794,319 | | | | — | |
| Preferred Stocks | | | 2,179,072 | | | | — | | | | — | |
| Warrants | | | 12,473 | | | | — | | | | — | |
| Short-Term Investments | | | 24,325,073 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 49,126,580 | | | $ | 324,028,604 | | | $ | — | |
| | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | |
| Emerging Markets Small-Cap Fund | | | | | | | | | | | | |
| Common Stocks | | | — | | | $ | 194,224,312 | | | $ | — | |
| Real Estate Investment Trusts | | | — | | | | 1,927,744 | | | | — | |
| Mutual Funds | | | 1,182,351 | | | | — | | | | — | |
| Warrants | | | 2,337 | | | | — | | | | — | |
| Short-Term Investments | | | 10,329,525 | | | | — | | | | — | |
| Total Investments in Securities | | $ | 11,514,213 | | | $ | 196,152,056 | | | $ | — | |
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
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, 2015 | | $ | 2,665,607 | |
| Purchases | | | — | |
| Returns of Capital | | | (143,292 | ) |
| Change in Unrealized Appreciation | | | 129,941 | |
| Balance as of December 31, 2015 | | $ | 2,652,256 | |
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.
Some of the Funds may invest in forward foreign currency 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
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
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 six months ended December 31, 2015.
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 and paid monthly for the Intermediate Income Fund, Total Return Fund, Strategic Bond Fund and Mortgage Securities 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, 2015. 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.
Notes to Financial StatementsDecember 31, 2015 (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% |
| Multi-Strategy Fund | 0.30% |
| Global Leaders Fund* | 0.65% |
| 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 period ended December 31, 2015, Brown Advisory Limited (“BAL”) served as sub-adviser to the Global Leaders Fund and made investment decisions on its behalf. BAL 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, 2015, 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, 2015, 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 six months ended December 31, 2015, 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.
Notes to Financial StatementsDecember 31, 2015 (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% |
| Multi-Strategy Fund | 1.10% | 1.25% | 1.50% |
| Global Leaders Fund | 0.70% | 0.85% | 1.10% |
| 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 ended December 31, 2015, the Adviser waived $14,052 in expenses for the Multi-Strategy Fund, $41,178 in expenses for the Global Leaders Fund, and $5,510 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, 2015, the cumulative amounts of previously waived fees that the Adviser may recoup from the Funds are shown below:
| | | June 30, | |
| | | 2016 | | | 2017 | | | 2018 | | | 2019 | | | Total | |
| Multi-Strategy Fund | | $ | — | | | $ | — | | | $ | 20,377 | | | $ | 14,052 | | | $ | 34,429 | |
| Global Leaders Fund | | | — | | | | — | | | | — | | | | 41,178 | | | | 41,178 | |
| Strategic Bond Fund | | | — | | | | — | | | | 7,500 | | | | 5,510 | | | | 13,010 | |
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.
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
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
the Mortgage Securities Fund. As of December 31, 2015, the Intermediate Income Fund owned shares of the Mortgage Securities Fund with a total market value of $36,829,660, or 24.4% 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, 2015, the Intermediate Income Fund waived $53,415 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, 2015:
| | | 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 | | 7/1/2015 | | | purchased] | | | shares sold] | | | 12/31/2015 | | | Gains | | | 12/31/2015 | | | Income | | | Distributions | |
| Mortgage Securities Fund | | $ | 33,931,642 | | | $ | 3,150,000 | | | $ | — | | | $ | (555,101 | ) | | $ | — | | | $ | 36,829,660 | | | $ | 448,348 | | | $ | 139,069 | |
| | | | [3,372,927 | ] | | | [310,039 | ] | | | [— | ] | | | | | | | | | | | [3,682,966 | ] | | | | | | | | |
Investments in Affiliates – Multi-Strategy Fund
The Multi-Strategy Fund invests in affiliated Brown Advisory Funds. As of December 31, 2015, the Multi-Strategy Fund owned shares of affiliated Brown Advisory Funds with a total market value of $2,854,696, or 96.7% 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 six months ended December 31, 2015:
| | | Beginning | | | Purchases | | | Proceeds | | | Unrealized | | | | | | Ending | | | | | | | |
| | | Market Value; | | | at Cost; | | | from Sales; | | | Appreciation | | | | | | Market Value; | | | | | | Capital | |
| Affiliated | | [# of shares held] | | | [# of shares | | | [# of | | | (Depreciation) | | | Realized | | | [# of shares held] | | | Dividend | | | Gains | |
Investment | | 7/1/2015 | | | purchased] | | | shares sold] | | | 12/31/2015 | | | Gains | | | 12/31/2015 | | | Income | | | Distributions | |
| Total Return Fund | | $ | 626,562 | | | $ | 166,626 | | | $ | — | | | $ | (21,721 | ) | | $ | — | | | $ | 788,102 | | | $ | 11,155 | | | $ | — | |
| | | | [63,740 | ] | | | [16,926 | ] | | | [— | ] | | | | | | | | | | | [80,666 | ] | | | | | | | | |
| Flexible Equity Fund | | $ | 709,389 | | | $ | 233,992 | | | $ | — | | | $ | (9,663 | ) | | $ | — | | | $ | 911,857 | | | $ | 6,622 | | | $ | — | |
| | | | [44,560 | ] | | | [14,536 | ] | | | [— | ] | | | | | | | | | | | [59,096 | ] | | | | | | | | |
| Small-Cap | | $ | 162,521 | | | $ | 58,107 | | | $ | — | | | $ | (12,348 | ) | | $ | — | | | $ | 204,278 | | | $ | 987 | | | $ | 4,164 | |
| Fundamental | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Value Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | [6,884 | ] | | | [2,517 | ] | | | [— | ] | | | | | | | | | | | [9,401 | ] | | | | | | | | |
| Strategic Bond Fund | | $ | 232,283 | | | $ | 71,752 | | | $ | — | | | $ | (16,430 | ) | | $ | — | | | $ | 291,005 | | | $ | 9,736 | | | $ | — | |
| | | | [23,630 | ] | | | [7,394 | ] | | | [— | ] | | | | | | | | | | | [31,024 | ] | | | | | | | | |
| WMC Strategic | | $ | 206,191 | | | $ | 62,878 | | | $ | — | | | $ | 5,411 | | | $ | — | | | $ | 266,737 | | | $ | 721 | | | $ | — | |
| European | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | [20,215 | ] | | | [6,039 | ] | | | [— | ] | | | | | | | | | | | [26,254 | ] | | | | | | | | |
| Somerset Emerging | | $ | 117,555 | | | $ | 55,288 | | | $ | — | | | $ | (23,754 | ) | | $ | — | | | $ | 150,245 | | | $ | 1,635 | | | $ | — | |
| Markets Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | [12,069 | ] | | | [6,143 | ] | | | [— | ] | | | | | | | | | | | [18,212 | ] | | | | | | | | |
| Small-Cap Growth Fund | | $ | 92,664 | | | $ | 45,333 | | | $ | — | | | $ | (9,713 | ) | | $ | — | | | $ | 119,594 | | | $ | — | | | $ | 17,143 | |
| | | | [2,580 | ] | | | [1,358 | ] | | | [— | ] | | | | | | | | | | | [3,938 | ] | | | | | | | | |
| Emerging Markets | | $ | 94,042 | | | $ | 49,022 | | | $ | — | | | $ | (9,529 | ) | | $ | — | | | $ | 122,878 | | | $ | — | | | $ | 5,058 | |
| Small-Cap Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | [8,038 | ] | | | [4,578 | ] | | | [— | ] | | | | | | | | | | | [12,616 | ] | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Totals: | | | $ | 2,854,696 | | | $ | 30,856 | | | $ | 26,365 | |
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
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, for the six months ended December 31, 2015 were as follows:
| | | Investment Securities | |
| | | Purchases | | | Sales | |
| Growth Equity Fund | | $ | 292,293,237 | | | $ | 434,523,729 | |
| Value Equity Fund | | | 26,374,487 | | | | 57,665,519 | |
| Flexible Equity Fund | | | 42,897,336 | | | | 14,633,495 | |
| Equity Income Fund | | | 13,455,392 | | | | 38,186,929 | |
| Sustainable Growth Fund | | | 109,293,271 | | | | 32,000,218 | |
| Small-Cap Growth Fund | | | 49,994,464 | | | | 56,436,358 | |
| Small-Cap Fundamental Value Fund | | | 152,439,930 | | | | 125,356,506 | |
| Multi-Strategy Fund | | | 742,998 | | | | — | |
| Global Leaders Fund | | | 11,005,246 | | | | 3,401,862 | |
| Intermediate Income Fund | | | 73,267,146 | | | | 72,162,147 | |
| Total Return Fund | | | 97,395,592 | | | | 102,740,597 | |
| Strategic Bond Fund | | | 61,512,535 | | | | 61,757,084 | |
| Maryland Bond Fund | | | 125,778,037 | | | | 132,677,853 | |
| Tax Exempt Bond Fund | | | 203,784,302 | | | | 198,330,140 | |
| Mortgage Securities Fund | | | 371,366,757 | | | | 242,505,014 | |
| Strategic European Equity Fund | | | 965,612,807 | | | | 115,912,443 | |
| Japan Alpha Opportunities Fund | | | 1,605,095,141 | | | | 922,996,241 | |
| Emerging Markets Fund | | | 92,500,412 | | | | 54,465,196 | |
| Emerging Markets Small-Cap Fund | | | 134,491,616 | | | | 99,533,306 | |
The Intermediate Income Fund purchased $26,141,585 and sold $8,752,816 in U.S. Government securities during the six months ended December 31, 2015. The Total Return Fund purchased $17,581,905 and sold $21,506,115 in U.S. Government securities during the six months ended December 31, 2015. Purchases and sales of U.S. Government securities are included in the totals above and include U.S. Treasury Bonds and Notes.
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
The cost basis of investments for federal income tax purposes at December 31, 2015 were as follows:
| | | Growth Equity | | | Value Equity | | | Flexible Equity | | | Equity Income | |
| | | Fund | | | Fund | | | Fund | | | Fund | |
| Tax Cost of Investments | | $ | 1,660,017,250 | | | $ | 101,807,168 | | | $ | 249,245,011 | | | $ | 131,046,242 | |
| Gross tax unrealized appreciation | | | 762,138,291 | | | | 24,747,204 | | | | 63,305,575 | | | | 38,200,876 | |
| Gross tax unrealized depreciation | | | (49,098,462 | ) | | | (6,884,945 | ) | | | (11,831,068 | ) | | | (6,144,167 | ) |
| Net tax unrealized appreciation (depreciation) | | $ | 713,039,829 | | | $ | 17,862,259 | | | $ | 51,474,507 | | | $ | 32,056,709 | |
| | | | | | | | | | | | | | | | | |
| | | Sustainable | | | | | | | Small-Cap | | | | | |
| | | Growth | | | Small-Cap | | | Fundamental | | | Multi-Strategy | |
| | | Fund | | | Growth Fund | | | Value Fund | | | Fund | |
| Tax Cost of Investments | | $ | 236,656,833 | | | $ | 194,936,339 | | | $ | 766,636,240 | | | $ | 3,045,072 | |
| Gross tax unrealized appreciation | | | 74,655,759 | | | | 80,660,834 | | | | 154,565,553 | | | | 5,411 | |
| Gross tax unrealized depreciation | | | (560,737 | ) | | | (8,392,368 | ) | | | (79,646,793 | ) | | | (109,818 | ) |
| Net tax unrealized appreciation (depreciation) | | $ | 74,095,022 | | | $ | 72,268,466 | | | $ | 74,918,760 | | | $ | (104,407 | ) |
| | | | | | | | | | | | | | | | | |
| | | Global Leaders | | | Intermediate | | | Total Return | | | Strategic | |
| | | Fund | | | Income Fund | | | Fund | | | Bond Fund | |
| Tax Cost of Investments | | $ | 18,387,049 | | | $ | 150,406,525 | | | $ | 85,054,013 | | | $ | 59,825,510 | |
| Gross tax unrealized appreciation | | | 1,028,016 | | | | 732,803 | | | | 329,141 | | | | 161,859 | |
| Gross tax unrealized depreciation | | | (257,914 | ) | | | (1,734,510 | ) | | | (1,200,738 | ) | | | (905,740 | ) |
| Net tax unrealized appreciation (depreciation) | | $ | 770,102 | | | $ | (1,001,707 | ) | | $ | (871,597 | ) | | $ | (743,881 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Strategic | |
| | | Maryland | | | Tax Exempt | | | Mortgage | | | European | |
| | | Bond Fund | | | Bond Fund | | | Securities Fund | | | Equity Fund | |
| Tax Cost of Investments | | $ | 184,494,815 | | | $ | 219,929,092 | | | $ | 394,255,407 | | | $ | 1,119,540,702 | |
| Gross tax unrealized appreciation | | | 2,994,102 | | | | 2,274,140 | | | | 2,419,664 | | | | 73,356,246 | |
| Gross tax unrealized depreciation | | | (253,887 | ) | | | (381,829 | ) | | | (4,268,089 | ) | | | (69,641,971 | ) |
| Net tax unrealized appreciation (depreciation) | | $ | 2,740,215 | | | $ | 1,892,311 | | | $ | (1,848,425 | ) | | $ | 3,714,275 | |
| | | | | | | | | | | | | | | | | |
| | | Japan Alpha | | | Emerging | | | Emerging | | | | | |
| | | Opportunities | | | Markets | | | Markets | | | | | |
| | | Fund | | | Fund | | | Small-Cap Fund | | | | | |
| Tax Cost of Investments | | $ | 2,126,447,013 | | | $ | 426,832,654 | | | $ | 212,720,388 | | | | | |
| Gross tax unrealized appreciation | | | 247,519,346 | | | | 23,223,711 | | | | 13,293,214 | | | | | |
| Gross tax unrealized depreciation | | | (159,218,644 | ) | | | (76,901,181 | ) | | | (18,347,333 | ) | | | | |
| Net tax unrealized appreciation (depreciation) | | $ | 88,300,702 | | | $ | (53,677,470 | ) | | $ | (5,054,119 | ) | | | | |
Because tax adjustments are calculated annually, the above tables reflect the tax adjustments outstanding as of the Fund’s previous fiscal year end (if applicable).
Notes to Financial StatementsDecember 31, 2015 (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, 2015 is estimated):
| | | Tax Exempt Income | | | Ordinary Income | |
| | | December 31, 2015 | | | June 30, 2015 | | | December 31, 2015 | | | June 30, 2015 | |
| Growth Equity Fund | | $ | — | | | $ | — | | | $ | 7,902,803 | | | $ | 10,853,820 | |
| Value Equity Fund | | | — | | | | — | | | | 3,830,952 | | | | 4,810,520 | |
| Flexible Equity Fund | | | — | | | | — | | | | 1,728,214 | | | | 1,001,462 | |
| Equity Income Fund | | | — | | | | — | | | | 2,352,333 | | | | 5,266,833 | |
| Sustainable Growth Fund | | | — | | | | — | | | | 2,679,763 | | | | — | |
| Small-Cap Growth Fund | | | — | | | | — | | | | 763,437 | | | | — | |
| Small-Cap Fundamental Value Fund | | | — | | | | — | | | | 2,796,636 | | | | 8,008,331 | |
| Multi-Strategy Fund | | | — | | | | — | | | | 14,413 | | | | 2,394 | |
| Global Leaders Fund | | | — | | | | N/A | | | | — | | | | N/A | |
| Intermediate Income Fund | | | — | | | | — | | | | 1,985,559 | | | | 3,532,751 | |
| Total Return Fund | | | — | | | | — | | | | 1,160,402 | | | | 836,802 | |
| Strategic Bond Fund | | | — | | | | — | | | | 1,877,811 | | | | 200,659 | |
| Maryland Bond Fund | | | 1,963,017 | | | | 3,466,082 | | | | — | | | | 10,220 | |
| Tax Exempt Bond Fund | | | 2,518,167 | | | | 3,896,216 | | | | — | | | | 7,149 | |
| Mortgage Securities Fund | | | — | | | | — | | | | 3,432,917 | | | | 7,844,211 | |
| Strategic European Equity Fund | | | — | | | | — | | | | 2,992,321 | | | | 2,192,615 | |
| Japan Alpha Opportunities Fund | | | — | | | | — | | | | 227,528,770 | | | | 64,930,081 | |
| Emerging Markets Fund | | | — | | | | — | | | | 3,928,021 | | | | 3,789,665 | |
| Emerging Markets Small-Cap Fund | | | — | | | | — | | | | 8,503,241 | | | | — | |
| | | | | | | | | | | | | | | | | |
| | | Long-Term Capital Gain^ | | | | | | | | | |
| | | December 31, 2015 | | | June 30, 2015 | | | | | | | | | |
| Growth Equity Fund | | $ | 141,076,505 | | | $ | 67,977,746 | | | | | | | | | |
| Value Equity Fund | | | 14,006,501 | | | | 5,195,581 | | | | | | | | | |
| Flexible Equity Fund | | | — | | | | — | | | | | | | | | |
| Equity Income Fund | | | 1,785,670 | | | | 8,348,294 | | | | | | | | | |
| Sustainable Growth Fund | | | 11,297,125 | | | | 4,340,210 | | | | | | | | | |
| Small-Cap Growth Fund | | | 39,659,022 | | | | 31,884,901 | | | | | | | | | |
| Small-Cap Fundamental Value Fund | | | 17,190,301 | | | | 27,145,541 | | | | | | | | | |
| Multi-Strategy Fund | | | 17,466 | | | | — | | | | | | | | | |
| Global Leaders Fund | | | — | | | | N/A | | | | | | | | | |
| Intermediate Income Fund | | | 369,469 | | | | — | | | | | | | | | |
| Total Return Fund | | | — | | | | — | | | | | | | | | |
| Strategic Bond Fund | | | — | | | | — | | | | | | | | | |
| Maryland Bond Fund | | | 906,772 | | | | 1,040,851 | | | | | | | | | |
| Tax Exempt Bond Fund | | | — | | | | — | | | | | | | | | |
| Mortgage Securities Fund | | | 1,257,738 | | | | — | | | | | | | | | |
| Strategic European Equity Fund | | | — | | | | — | | | | | | | | | |
| Japan Alpha Opportunities Fund | | | 3,902,671 | | | | — | | | | | | | | | |
| Emerging Markets Fund | | | — | | | | — | | | | | | | | | |
| Emerging Markets Small-Cap Fund | | | — | | | | — | | | | | | | | | |
^ Designated as a long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3).
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
At June 30, 2015, 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 | | $ | 717,028,992 | | | $ | 25,868,611 | | | $ | 52,390,733 | | | $ | 40,551,725 | |
| Net unrealized appreciation on foreign receivables | | | — | | | | — | | | | (311 | ) | | | — | |
| Undistributed ordinary income | | | — | | | | 3,830,901 | | | | 826,205 | | | | — | |
| Undistributed long-term capital gain | | | 99,087,324 | | | | 14,006,420 | | | | — | | | | 1,785,605 | |
| Total distributable earnings | | | 99,087,324 | | | | 17,837,321 | | | | 826,205 | | | | 1,785,605 | |
| Other accumulated losses | | | — | | | | — | | | | (563,381 | ) | | | — | |
| Total accumulated earnings | | $ | 816,116,316 | | | $ | 43,705,932 | | | $ | 52,653,246 | | | $ | 42,337,330 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Small-Cap | | | | | |
| | | Sustainable | | | Small-Cap | | | Fundamental | | | Multi-Strategy | |
| | | Growth Fund | | | Growth Fund | | | Value Fund | | | Fund | |
| Net tax unrealized appreciation | | $ | 66,449,770 | | | $ | 95,012,278 | | | $ | 132,733,865 | | | $ | 25,103 | |
| Net unrealized appreciation on foreign receivables | | | (124 | ) | | | — | | | | — | | | | — | |
| Undistributed ordinary income | | | — | | | | 763,358 | | | | — | | | | 3,855 | |
| Undistributed long-term capital gain | | | 10,482,038 | | | | 24,907,663 | | | | 17,190,395 | | | | 4,624 | |
| Total distributable earnings | | | 10,482,038 | | | | 25,671,021 | | | | 17,190,395 | | | | 8,479 | |
| Other accumulated losses | | | (9,655,423 | ) | | | (826,491 | ) | | | (6,307,397 | ) | | | (10,237 | ) |
| Total accumulated earnings | | $ | 67,276,261 | | | $ | 119,856,808 | | | $ | 143,616,863 | | | $ | 23,345 | |
| | | | | | | | | | | | | | | | | |
| | | Intermediate | | | Total Return | | | Strategic | | | Maryland | |
| | | Income Fund | | | Fund | | | Bond Fund | | | Bond Fund | |
| Net tax unrealized appreciation (depreciation) | | $ | (892,792 | ) | | $ | (521,159 | ) | | $ | (817,610 | ) | | $ | 1,705,701 | |
| Undistributed ordinary income | | | 453,444 | | | | 155,204 | | | | 772,240 | | | 246,879 | ^ |
| Undistributed long-term capital gain | | | 369,442 | | | | — | | | | — | | | | — | |
| Total distributable earnings | | | 822,886 | | | | 155,204 | | | | 772,240 | | | 246,879 | ^ |
| Other accumulated losses | | | (190,234 | ) | | | (1,273,889 | ) | | | (1,294,068 | ) | | | (361,093 | ) |
| Total accumulated earnings (losses) | | $ | (260,140 | ) | | $ | (1,639,844 | ) | | $ | (1,339,438 | ) | | $ | 1,591,487 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | Mortgage | | | Strategic | | | Japan Alpha | |
| | | Tax Exempt | | | Securities | | | European | | | Opportunities | |
| | | Bond Fund | | | Fund | | | Equity Fund | | | Fund | |
| Net tax unrealized appreciation (depreciation) | | $ | (973,681 | ) | | $ | (950,820 | ) | | $ | 7,287,374 | | | $ | 131,941,046 | |
| Net unrealized appreciation on foreign receivables | | | — | | | | — | | | | (23,193 | ) | | | (74,537 | ) |
| Undistributed ordinary income | | 246,728 | ^ | | | 16,572 | | | | 2,991,719 | | | | 215,448,004 | |
| Undistributed long-term capital gain | | | — | | | | 1,036,868 | | | | — | | | | 17,516,617 | |
| Total distributable earnings | | 246,728 | ^ | | | 1,053,440 | | | | 2,991,719 | | | | 232,964,621 | |
| Other accumulated losses | | | (1,657,038 | ) | | | — | | | | (9,108,703 | ) | | | (19,059,167 | ) |
| Total accumulated earnings (losses) | | $ | (2,383,991 | ) | | $ | 102,620 | | | $ | 1,147,197 | | | $ | 345,771,963 | |
| | | | | | | | | | | | | | | | | |
| | | Emerging | | | Emerging | | | | | | | | | |
| | | Markets | | | Markets | | | | | | | | | |
| | | Fund | | | Small-Cap Fund | | | | | | | | | |
| Net tax unrealized appreciation (depreciation) | | $ | (2,843,242 | ) | | $ | 13,397,315 | | | | | | | | | |
| Net unrealized appreciation on foreign receivables | | | (25,268 | ) | | | 1,143 | | | | | | | | | |
| Undistributed ordinary income | | | 2,706,260 | | | | 8,503,213 | | | | | | | | | |
| Undistributed long-term capital gain | | | — | | | | — | | | | | | | | | |
| Total distributable earnings | | | 2,706,260 | | | | 8,503,213 | | | | | | | | | |
| Other accumulated losses | | | (7,465,126 | ) | | | — | | | | | | | | | |
| Total accumulated earnings (losses) | | $ | (7,627,376 | ) | | $ | 21,901,671 | | | | | | | | | |
^ Represents tax exempt income.
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
Note 6. Forward Foreign Currency Contracts
The Strategic European Equity Fund and the Japan Alpha Opportunities Fund invested in forward foreign currency contracts during the six months ended December 31, 2015.
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.
The effect of forward foreign currency contracts on the Statements of Assets and Liabilities as of December 31, 2015 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 | | $ | 148,008 | |
| Japan Alpha Opportunities Fund | | Forward Foreign Currency Contracts | | Liabilities: Gross Unrealized | | | | |
| | | | | | Depreciation – Forward Foreign | | | | |
| | | | | | Currency Contracts | | $ | 16,164,509 | |
| |
| The effect of forward foreign currency contracts on the Statements of Operations for the six months ended December 31, 2015 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 | | $ | (58,604,892 | ) |
| Japan Alpha Opportunities Fund | | Forward Foreign Currency Contracts | | Net Change in Unrealized | | | | |
| | | | | | Appreciation (Depreciation) – | | | | |
| | | | | | Forward Foreign Currency Contracts | | $ | 3,042,666 | |
| Strategic European Equity Fund | | Forward Foreign Currency Contracts | | Net Realized Gain (Loss) – | | | | |
| | | | | | Forward Foreign Currency Contracts | | $ | (82,499 | ) |
During the six months ended December 31, 2015, the average original market value, in U.S. Dollars, of forward foreign currency contracts held by the Fund was $1,915,121,215. 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.
During the six months ended December 31, 2015, the average original market value, in U.S. Dollars, of forward foreign currency contracts held by Strategic European Equity Fund was $40,696,007.
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”.
Notes to Financial Statements
December 31, 2015 (Unaudited)
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.
| Assets: | | | | | | | | | | | | | | | | | | |
| | | | | | Gross Amounts | | | Net Amounts | | | Gross Amounts Not Offset in the Statement of Assets & Liabilities | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | | | | |
| | | 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: | | | | | | | | | | | | | | | | | | |
| Citibank N.A. | | $ | 148,008 | | | $ | (148,008 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| RBC Capital Markets | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Total | | $ | 148,008 | | | $ | (148,008 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Gross Amounts | | | Net Amounts | | | Gross Amounts Not Offset in the Statement of Assets & Liabilities | | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | | | | | |
| | | 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: | | | | | | | | | | | | | | | | | | | | | | | | |
| Citibank N.A. | | $ | — | | | $ | (148,008 | ) | | $ | (148,008 | ) | | $ | — | | | $ | — | | | $ | (148,008 | ) |
| RBC Capital Markets | | | 16,164,509 | | | | — | | | | 16,164,509 | | | | — | | | | — | | | | 16,164,509 | |
| Total | | $ | 16,164,509 | | | $ | (148,008 | ) | | $ | 16,016,501 | | | $ | — | | | $ | — | | | $ | 16,016,501 | |
Note 7. Futures Contracts
The Total Return Fund, Strategic Bond Fund, Strategic European Equity Fund and Japan Alpha Opportunities Fund invested in futures contracts during the six months ended December 31, 2015. 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. 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.
Notes to Financial StatementsDecember 31, 2015 (Unaudited)
The effect of futures contracts on the Statements of Assets and Liabilities as of December 31, 2015 is as follows:
| | | Derivatives not accounted | | Statement of Assets | | | |
Fund | | for as hedging instruments | | and Liabilities Location | | Amount | |
| Total Return Fund | | Futures Contracts | | Gross Unrealized Appreciation – | | | |
| | | | | | Futures Contracts | | $ | 97,330 | |
| | | | | | | | | |
| Total Return Fund | | Futures Contracts | | Gross Unrealized Depreciation – | | | | |
| | | | | | Futures Contracts | | $ | — | |
| Strategic Bond Fund | | Futures Contracts | | Gross Unrealized Appreciation – | | | | |
| | | | | | Futures Contracts | | $ | 16,706 | |
| | | | | | | | | |
| Strategic Bond Fund | | Futures Contracts | | Gross Unrealized Depreciation – | | | | |
| | | | | | Futures Contracts | | $ | — | |
| Japan Alpha Opportunities Fund | | Futures Contracts | | Gross Unrealized Appreciation – | | | | |
| | | | | | Futures Contracts | | $ | — | |
| | | | | | | | | |
| Japan Alpha Opportunities Fund | | Futures Contracts | | Gross Unrealized Depreciation – | | | | |
| | | | | | Futures Contracts | | $ | 945,626 | |
The effect of futures contracts on the Statements of Operations for the six months ended December 31, 2015 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 | | $ | 60,669 | |
| | | | | | | | | |
| Total Return Fund | | Futures Contracts | | Net Change in Unrealized | | | | |
| | | | | | Appreciation (Depreciation) – | | | | |
| | | | | | Futures Contracts | | $ | 237,028 | |
| Strategic Bond Fund | | Futures Contracts | | Net Realized Gain (Loss) – | | | | |
| | | | | | Futures Contracts | | $ | 54,590 | |
| | | | | | | | | |
| Strategic Bond Fund | | Futures Contracts | | Net Change in Unrealized | | | | |
| | | | | | Appreciation (Depreciation) – | | | | |
| | | | | | Futures Contracts | | $ | 43,112 | |
| Japan Alpha Opportunities Fund | | Futures Contracts | | Net Realized Gain (Loss) – | | | | |
| | | | | | Futures Contracts | | $ | (9,799,451 | ) |
| | | | | | | | | |
| Japan Alpha Opportunities Fund | | Futures Contracts | | Net Change in Unrealized | | | | |
| | | | | | Appreciation (Depreciation) – | | | | |
| | | | | | Futures Contracts | | $ | 336,271 | |
| Strategic European Equity Fund | | Futures Contracts | | Net Realized Gain (Loss) – | | | | |
| | | | | | Futures Contracts | | $ | (1,711,587 | ) |
During the six months ended December 31, 2015, the average notional fair value of long futures contracts held by the Total Return Fund, Strategic European Equity Fund and Japan Alpha Opportunities Fund were $11,986,607, $109,419 and $161,220,490, respectively.
During the six months ended December 31, 2015, the average notional fair value of the short futures contracts held by the Total Return Fund and Strategic Bond Fund were $7,950,235 and $4,944,802, 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.” 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 to offset, or present on a net basis, assets and liabilities related to futures contracts.
Notes to Financial Statements
December 31, 2015 (Unaudited)
| Assets: | | | | | | | | | | | | | | | | | | |
| | | | | | Gross Amounts | | | Net Amounts | | | Gross Amounts Not Offset in the Statement of Assets & Liabilities | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | | | | |
| | | 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 | | $ | 97,330 | | | $ | — | | | $ | 97,330 | | | $ | — | | | $ | — | | | $ | 97,330 | |
| Strategic Bond Fund | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures contracts | | | 16,706 | | | | — | | | | 16,706 | | | | — | | | | — | | | | 16,706 | |
| Japan Alpha Opportunities Fund | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures contracts | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Gross Amounts | | | Net Amounts | | | Gross Amounts Not Offset in the Statement of Assets & Liabilities | | | | | |
| | | Gross | | | Offset in the | | | Presented in | | | | | | | |
| | | 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 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Strategic Bond Fund | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures contracts | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Japan Alpha Opportunities Fund | | | | | | | | | | | | | | | | | | | | | | | | |
| Futures contracts | | | 945,626 | | | | — | | | | 945,626 | | | | — | | | $ | 945,626 | | | | — | |
Note 8. Line of Credit
As of December 31, 2015, Brown Advisory Funds has an unsecured line of credit of up to $100,000,000 with U.S. Bank, N.A. The interest rate on the line of credit as of December 31, 2015 was 3.50% (prime rate). During the six months ended December 31, 2015, the only Funds to utilize the line of credit were the Value Equity Fund and the Strategic Bond Fund. The Value Equity Fund had a maximum outstanding balance of $497,000 and an average daily balance outstanding of $4,810. The Strategic Bond Fund had a maximum outstanding balance of $580,000 and an average daily balance outstanding of $16,951. The total interest expenses incurred by the Value Equity Fund and Strategic Bond Fund under the terms of the line of credit were $80 and $299, respectively. As of December 31, 2015, none of the Funds had any amounts outstanding under the line of credit.
Note 9. Merger of Funds
As of the close of business on October 23, 2015, pursuant to an Agreement and Plan of Reorganization approved by the Funds’ Board of Trustees, all of the assets, subject to the liabilities, of the Brown Advisory Opportunity Fund (“Opportunity Fund”) were transferred to the Global Leaders Fund in exchange for shares of the Global Leaders Fund of equal value. The purpose of the transaction was to combine two funds with similar investment strategies into a single fund where the Fund and its shareholders have the potential to benefit from economies of scale. Investor Shares of the Opportunity Fund were exchanged for Investor Shares of the Global Leaders Fund. The exchange ratio was 2.446. The net asset value of the Global Leaders Fund’s Investor Shares on the close of business October 23, 2015 both before and after the reorganization was $10.09. A total of 994,393 Investor Shares were issued to the shareholders of the Opportunity Fund in the exchange. The Opportunity Fund’s net assets at the reorganization date of $10,035,030, including $254,611 of unrealized appreciation, were combined with those of the Global Leaders Fund. Assuming the acquisition had been completed on July 1, 2015, the beginning of the annual reporting period of the Global Leaders Fund, proforma results of operations for the period ended December 31, 2015 would include net investment loss of $15,218, and net realized and change in unrealized loss of $74,904, resulting in a decrease in net assets of $90,122. Prior to the reorganization, the Global Leaders Fund net assets totaled $4,178,793. Immediately after the reorganization, the net assets of the Global Leaders
Notes to Financial Statements
December 31, 2015 (Unaudited)
Fund totaled $14,213,823. The exchange was a tax-free event to the Opportunity Fund shareholders. For financial reporting purposes, assets received and shares issued by the Global Leaders Fund were recorded at fair value; however, the cost basis of investments received from the Opportunity Fund was carried forward to align ongoing reporting of the Global Leaders Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
Expense Example For the Six Months Ended December 31, 2015 (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 six month period and held for the entire period (July 1, 2015 – December 31, 2015).
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 | Net Expense |
| | July 1, 2015 | December 31, 2015 | During the Period* | Ratio* |
| Growth Equity Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,021 | $3.66 | 0.72% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $3.66 | 0.72% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,020 | $4.42 | 0.87% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.42 | 0.87% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,019 | $5.68 | 1.12% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $5.69 | 1.12% |
Expense Example For the Six Months Ended December 31, 2015 (Unaudited)
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Net Expense |
| | July 1, 2015 | December 31, 2015 | During the Period* | Ratio* |
| Value Equity Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 919 | $3.67 | 0.76% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $3.86 | 0.76% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 918 | $4.39 | 0.91% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.62 | 0.91% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 917 | $5.59 | 1.16% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.89 | 1.16% |
| | | | | |
| Flexible Equity Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 976 | $3.68 | 0.74% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $3.76 | 0.74% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 975 | $4.42 | 0.89% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.52 | 0.89% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 974 | $5.66 | 1.14% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.79 | 1.14% |
| | | | | |
| Equity Income Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 960 | $3.70 | 0.75% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $3.81 | 0.75% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 959 | $4.43 | 0.90% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.57 | 0.90% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 959 | $5.66 | 1.15% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.84 | 1.15% |
| | | | | |
| Sustainable Growth Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,052 | $3.82 | 0.74% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $3.76 | 0.74% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,051 | $4.59 | 0.89% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.52 | 0.89% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,050 | $5.87 | 1.14% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.79 | 1.14% |
Expense Example For the Six Months Ended December 31, 2015 (Unaudited)
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Net Expense |
| | July 1, 2015 | December 31, 2015 | During the Period* | Ratio* |
| Small-Cap Growth Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 989 | $4.95 | 0.99% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $5.03 | 0.99% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 988 | $5.70 | 1.14% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.79 | 1.14% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 988 | $6.95 | 1.39% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,018 | $7.05 | 1.39% |
| | | | | |
| Small-Cap Fundamental Value Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 944 | $4.79 | 0.98% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $4.98 | 0.98% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 943 | $5.52 | 1.13% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.74 | 1.13% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 942 | $6.74 | 1.38% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,018 | $7.00 | 1.38% |
| | | | | |
| Multi-Strategy Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 972 | $5.45 | 1.10% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $5.58 | 1.10% |
| Global Leaders Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 989 | $4.23 | 0.85% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,021 | $4.29 | 0.85% |
| | | | | |
| Intermediate Income Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,004 | $2.22 | 0.44% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.24 | 0.44% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $1,004 | $3.48 | 0.69% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $3.51 | 0.69% |
| | | | | |
| Total Return Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,008 | $2.57 | 0.51% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.59 | 0.51% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,008 | $2.83 | 0.56% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $2.85 | 0.56% |
Expense Example For the Six Months Ended December 31, 2015 (Unaudited)
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Net Expense |
| | July 1, 2015 | December 31, 2015 | During the Period* | Ratio* |
| Strategic Bond Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 988 | $3.50 | 0.70% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,022 | $3.56 | 0.70% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 986 | $4.74 | 0.95% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $4.82 | 0.95% |
| | | | | |
| Maryland Bond Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,021 | $2.49 | 0.49% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.49 | 0.49% |
| | | | | |
| Tax Exempt Bond Fund | | | | |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,022 | $2.49 | 0.49% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.49 | 0.49% |
| | | | | |
| Mortgage Securities Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $1,010 | $2.27 | 0.45% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.29 | 0.45% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $1,010 | $2.53 | 0.50% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,023 | $2.54 | 0.50% |
| | | | | |
| Strategic European Equity Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 999 | $5.38 | 1.07% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,020 | $5.43 | 1.07% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 998 | $6.13 | 1.22% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $6.19 | 1.22% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 996 | $7.38 | 1.47% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,018 | $7.46 | 1.47% |
| | | | | |
| Japan Alpha Opportunities Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 936 | $5.55 | 1.14% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $5.79 | 1.14% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 935 | $6.28 | 1.29% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $6.55 | 1.29% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 934 | $7.48 | 1.54% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $7.81 | 1.54% |
Expense Example For the Six Months Ended December 31, 2015 (Unaudited)
| | Beginning | Ending | | Annualized |
| | Account Value | Account Value | Expenses Paid | Net Expense |
| | July 1, 2015 | December 31, 2015 | During the Period* | Ratio* |
| Emerging Markets Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 856 | $5.55 | 1.19% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,019 | $6.04 | 1.19% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 855 | $6.25 | 1.34% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,018 | $6.80 | 1.34% |
| Advisor Shares | | | | |
| Actual Return | $1,000 | $ 854 | $7.41 | 1.59% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $8.06 | 1.59% |
| | | | | |
| Emerging Markets Small-Cap Fund | | | | |
| Institutional Shares | | | | |
| Actual Return | $1,000 | $ 868 | $7.19 | 1.53% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $7.76 | 1.53% |
| Investor Shares | | | | |
| Actual Return | $1,000 | $ 867 | $7.89 | 1.68% |
| Hypothetical (5% annual return before expenses) | $1,000 | $1,017 | $8.52 | 1.68% |
| * | 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 net 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’ fiscal year ended as of the date of this report. Actual Return amounts for the Global Leaders Fund are based upon the period of time from the inception of the Fund (end of day on July 1, 2015) to December 31, 2015. No expenses were incurred by Global Leaders Fund shareholders on July 1, 2015. |
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One 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 Total Return Fund, the Brown Advisory Multi-Strategy Fund and the Brown Advisory Emerging Markets Small-Cap 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 that are being considered for continuation, 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 Emerging Markets Fund; (2) the approval of the continuation of each of the Sub-Investment Advisory Agreements with respect to the Brown Advisory-WMC Strategic European Equity Fund and the Brown Advisory-WMC Japan Alpha Opportunities Fund, and (3) the approval of the adoption of the Investment Advisory Agreement and the Sub-Investment Advisory Agreement with respect to the Brown Advisory Global Leaders 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 24, 2015. 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, 2016.
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 applicable 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, 2015, and for shorter periods as applicable with respect to
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
those Funds with shorter operating histories. The Board took into consideration that this information for certain of the Funds included information from when certain of 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 their respective successor 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 and three-year periods ended June 30, 2015. The Board also noted that the Investor Shares of the Fund had underperformed its peer group median for the one- and three-year periods ended June 30, 2015.
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 one- and three-year periods ended June 30, 2015, but had underperformed its primary benchmark index for the five-year period ended June 30, 2015. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one-year period ended June 30, 2015, but had outperformed its peer group median for the three- and five-year periods ended June 30, 2015.
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, 2015, but had outperformed its primary benchmark index for the ten-year period ended June 30, 2015. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one-, three-, and five-year periods ended June 30, 2015, but had outperformed its peer group median for the ten-year period ended June 30, 2015.
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, 2015. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one-year period ended June 30, 2015, but had outperformed its peer group median for the three- and five-year periods ended June 30, 2015.
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 three- and five-year periods ended June 30, 2015, but had outperformed its primary benchmark index for the one- and ten-year periods ended June 30, 2015. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the five-year period ended June 30, 2015, but had outperformed its peer group median for the one- and ten-year periods ended June 30, 2015. The Board also noted that the Investor Shares of the Fund had matched its peer group median for the three-year period ended June 30, 2015.
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 one-, three-, five- and ten-year periods ended June 30, 2015. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one-, three-, five-, and ten-year periods ended June 30, 2015.
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
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 three-year period ended June 30, 2015, but had outperformed its primary benchmark index for the one-year period ended June 30, 2015. The Board noted that the Investor Shares of the Fund had outperformed its peer group median for the one- and three-year periods ended June 30, 2015.
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 U.S. Aggregate Bond Index, for the one-, three-, five- and ten-year periods ended June 30, 2015. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one-, three-, five-, and ten-year periods ended June 30, 2015. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
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, 2015. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one-, three-, five-, and ten-year periods ended June 30, 2015. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
Strategic Bond Fund
The Board then reviewed information and materials regarding the performance results for the Strategic Bond Fund, noting that the Advisor Shares of the Fund had underperformed its primary benchmark index, the Barclays Intermediate U.S. Aggregate Bond Index, for the one- and three-year periods ended June 30, 2015. The Board noted that the Advisor Shares of the Fund had underperformed its peer group median for the one-year period ended June 30, 2015, but had outperformed its peer group median for the three-year period ended June 30, 2015. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
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- and three-year periods ended June 30, 2015. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one- and three-year periods ended June 30, 2015. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
Somerset Emerging Markets Fund
The Board then reviewed information and materials regarding the performance results for the Somerset Emerging Markets Fund, noting that the Institutional Shares of the Fund had outperformed its primary benchmark index, the MSCI Emerging Markets Index, for the one-year period ended June 30, 2015. The Board also noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-year period ended June 30, 2015.
WMC Strategic European Equity Fund
The Board next reviewed information and materials regarding the performance results for the WMC Strategic European Equity Fund, noting that the Institutional Shares of the Fund had outperformed its primary benchmark index, the MSCI Europe Index, for the one-year period ended June 30, 2015. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-year period ended June 30, 2015.
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
WMC Japan Alpha Opportunities Fund
The Board then reviewed information and materials regarding the performance results for the WMC Japan Alpha Opportunities Fund, noting that the Institutional Shares of the Fund had underperformed its primary benchmark index, the TOPIX Total Return U.S. Dollar Hedged Index, for the one-year period ended June 30, 2015. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-year period ended June 30, 2015. The Board also noted that, because the Fund commenced operations in March 2014, the Fund has a relatively short performance history.
Mortgage Securities Fund
The Board next reviewed information and materials regarding the performance results for the Mortgage Securities Fund, noting that the Institutional Shares of the Fund had outperformed its primary benchmark index, the Barclays Mortgage Backed Securities Index, for the one-year period ended June 30, 2015. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-year period ended June 30, 2015.
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, 2016, 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 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 the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.90%, which is lower than the median 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 the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.91%, which was below the median 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 the median compared to its peer funds.
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.87%, which was above the median 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 the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 1.13%, which was above the median 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 above the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 1.14%, which was higher than the median 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 the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.90%, which was lower than the median 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 the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.90%, which was lower than the average net expense ratio of its peer funds.
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 the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.45%, which was lower than the median 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 median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.49%, which was lower than the median net expense ratio of its peer funds.
Strategic Bond Fund
The Board then reviewed expense information and materials for the Strategic Bond Fund, noting that the Investment Advisory Agreement provided for a 0.40% investment advisory fee for the Fund, which was below the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Advisor Shares was 0.95%, which was lower than the median net expense ratio of its peer funds.
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 the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.50%, which was lower than the median net expense ratio of its peer funds.
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
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 the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Institutional Shares was 1.22%, which was lower than the median net expense ratio of its peer funds.
WMC Strategic European Equity Fund
The Board next reviewed expense information and materials for the European Equity Fund, noting that the Investment Advisory Agreement provided for a 0.90% investment advisory fee for the Fund, which was comparable to the median for its peer funds. The Board also noted that the net expense ratio of the Fund’s Institutional Shares was 1.13%, which was comparable to the median net expense ratio of its peer funds.
WMC Japan Alpha Opportunities Fund
The Board then reviewed expense information and materials for the WMC Japan Alpha Opportunities Fund, noting that the Investment Advisory Agreement provided for a 1.00% investment advisory fee for the Fund, which was above the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Institutional Shares was 1.15%, which was higher than the median net expense ratio of its peer funds.
Mortgage Securities Fund
The Board next reviewed expense information and materials for the Mortgage Securities Fund, noting that the Investment Advisory Agreement provided for a 0.30% investment advisory fee for the Fund, which was below the median compared to its peer funds. The Board also noted that the net expense ratio of the Fund’s Institutional Shares was 0.47%, which was lower than the median 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 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
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
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”), was also approved by the Board of Trustees at the Board meeting held on September 24, 2015.
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 Somerset, 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 Somerset 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 Somerset 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 Somerset. The Trustees considered that the Adviser is actively engaged in conducting an ongoing monitoring program involving Somerset’s investment activities with respect to Somerset’s day-to-day portfolio management of the Fund’s assets in order to make sure that Somerset is adhering to all of the stated investment objectives, policies, limitations and restrictions that the Fund is subject to. In addition, the Trustees also took note of the fact that in connection with the Adviser’s
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
oversight of the investment program maintained by Somerset with respect to the Fund, the Adviser prepares extensive reports to the Board regarding the investment activities of Somerset, which reports contain detailed analyses of how Somerset is performing.
The Board reviewed and evaluated the information that the Adviser and Somerset 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, 2016. 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
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
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 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.
| 3. | Board of Trustees Approval of the Continuation of Each of the Sub-Investment Advisory Agreements With Respect to: (i) the Brown Advisory-WMC Strategic European Equity Fund and (ii) the Brown Advisory-WMC Japan Alpha Opportunities Fund |
Each of the Sub-Investment Advisory Agreements with respect to: (i) the Brown Advisory-WMC Strategic European Equity Fund (the “Strategic European Equity Fund”) between Brown Advisory and Wellington Management Company LLP, the sub-investment adviser to the Strategic European Equity Fund (“Wellington”), and (ii) the Brown Advisory-WMC Japan Alpha Opportunities Fund (the “Japan Alpha Opportunities Fund”) between Brown Advisory and Wellington, the sub-investment adviser to the Japan Alpha Opportunities Fund, were also approved by the Board of Trustees at the Board meeting held on September 24, 2015.
In accordance with the Investment Company Act of 1940, the Board of Trustees was required to consider the approval of the continuation of each of the Sub-Investment Advisory Agreements, 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 Agreements, and it is the duty of the Adviser and Wellington, as applicable, to furnish the Trustees with such information that is responsive to their request.
Accordingly, in determining whether to approve the continuation each of the Sub-Investment Advisory Agreements between Brown Advisory and Wellington, the Board of Trustees requested, and the Adviser and Wellington 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 each of the Sub-Investment Advisory Agreements between Brown Advisory and Wellington. The Trustees considered various matters involving the respective services provided by each of the Adviser and Wellington in connection with the management and operation of each of the Funds and they took note of the extensive oversight duties performed by the Adviser including investment management and compliance oversight of the operations of Wellington. The Trustees considered that the Adviser is actively engaged in conducting an ongoing monitoring program involving Wellington’s investment activities with respect to Wellington’s day-to-day portfolio management of each Fund’s assets in order to make sure that Wellington is adhering to all of the stated investment objectives, policies, limitations and restrictions that each Fund is subject to. In addition, the Trustees also took note of the fact that in connection with the Adviser’s oversight of the investment program maintained by Wellington with respect to each of the Funds, the Adviser prepares extensive reports to the Board regarding the investment activities of Wellington, which reports contain detailed analyses of how Wellington is performing
The Board reviewed and evaluated the information that the Adviser and Wellington had presented for the Board’s review. The Board particularly noted, among other considerations, that each respective Fund’s investment advisory fees and overall operating expenses were competitive with comparable mutual funds. The Board also took into account presentations made by Wellington and the Adviser throughout the year. Based on its review of all of the information, the Board determined that each of the Sub-Investment Advisory Agreements was consistent with the best interests of the respective Funds and their shareholders and would enable each of the Funds to continue to receive high quality sub-advisory services at a cost that is appropriate, reasonable, and in the best interests of each of the Funds and their respective 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 Wellington is capable of providing high quality sub-advisory services to each of the Funds as indicated by the professional qualifications and experience of the respective portfolio managers of the Funds, and Wellington’s investment management processes. On the basis of the Trustees’ assessment of the nature, extent and quality of the sub-advisory services provided by Wellington, the Trustees concluded that Wellington is capable of generating a level of long-term investment performance that is appropriate in light of each Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
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 each of the Funds are competitive with industry averages. The Trustees also noted that each of the Funds 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, 2016. The Board took note of the fact that the sub-advisory fees had been separately negotiated by Brown Advisory and Wellington. Accordingly, on the basis of the Board’s review of the fees charged by Wellington for sub-investment advisory services provided to the Funds, 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 fees had been separately negotiated at arms-length by independent third parties.
The extent to which economies of scale may be realized as the Funds grows and whether the advisory fees reflect possible economies of scale. While it was noted that each Fund’s investment sub-advisory fees will not decrease as the Funds’ assets grow because they will not be subject to investment sub-advisory fee breakpoints, the Trustees concluded that each Fund’s investment sub-advisory fees are appropriate in light of the size of the Funds, and appropriately reflect the current economic environment for Brown Advisory and Wellington and the competitive nature of the mutual fund marketplace. The Trustees then noted that they will have the opportunity to periodically re-examine whether either Fund has achieved economies of scale, and the appropriateness of the investment sub-advisory fees with respect to each Fund, in the future at which time the implementation of fee breakpoints on one or both of the Funds could be further considered.
Benefits to Wellington from its relationships with the Funds (and any corresponding benefits to the Funds). The Trustees concluded that other benefits that may be derived by Wellington from its relationships with the Funds, including any potential “soft dollar” benefits in connection with each Fund’s brokerage transactions and use of each 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 Agreements, the Trustees determined that Wellington 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 Funds in a professional manner that is consistent with the best interests of the Funds and their shareholders. The Board also considered matters with respect to the brokerage practices of Wellington, 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 Wellington with respect to the contracts 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 Agreements and the level of fees paid under the Agreements, 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 Wellington to the Funds and determined that that these services will continue to benefit the Funds and their shareholders. They also considered the nature of the allocation of the duties and responsibilities for the management and operation of the Funds between Brown Advisory and Wellington and they determined that the sub-advisory fees for each respective Fund, as negotiated by Brown Advisory and Wellington, reasonably reflected the nature and extent of the services provided by Wellington with respect to the Funds.
| 4. | Board of Trustees Approval of the Adoption of the Investment Advisory Agreement and Sub-Investment Advisory Agreement for the Brown Advisory Global Leaders Fund |
The adoption of the Investment Advisory Agreement between the Trust, on behalf of the Brown Advisory Global Leaders Fund (the “Global Leaders Fund”), and Brown Advisory was approved by the Board of Trustees at the meeting of the Board held on May 6, 2015. At the same meeting, the Board of Trustees also approved the Sub-Investment Advisory Agreement with respect to the Global Leaders Fund between Brown Advisory and its affiliate Brown Advisory Ltd. (“Brown Advisory Ltd.” or the “Sub-Adviser”), as sub-investment adviser to the Global Leaders 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
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;
(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
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 Brown Advisory and the Trust with respect to the Global Leaders Fund, and (2) the Sub-Investment Advisory Agreement between Brown Advisory and Brown Advisory Ltd. with respect to the Global Leaders 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 with respect to the other Funds in the Trust, and the investment experience and background of the proposed portfolio manager for the Global Leaders Fund, as well as information regarding the estimated fees and expenses of the Global Leaders Fund, as compared to other similar mutual funds.
The Board initially considered matters with respect to the proposed establishment and organization of the Global Leaders Fund at prior meetings of the Board held on November 5, 2014 and on February 12, 2015, in order to consider various matters with respect to the proposed approval of each of the Agreements. At each of these meetings, the Board reviewed with representatives of the Adviser various matters with respect to the proposed management and operation of the Global Leaders Fund, the proposed sub-advisory services to be provided to the 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 Fund, the compliance oversight process involving the Fund and its operations, and the proposed fees and expenses of the Fund, including the proposed sub-advisory fees to be paid to the Sub-Adviser. During each of these meetings representatives of the Adviser made presentations to the Board regarding their proposal to provide investment advisory services to the Global Leaders Fund and their recommendation to retain the Sub-Adviser to provide sub-advisory services to the Fund, and they reviewed the process that they had followed in determining to propose the selection of Brown Advisory Ltd. to serve as Sub-Adviser to the Fund.
The Board then met again at in-person meeting of the Board of Trustees held on May 6, 2015 in order to consider matters with respect to the Global Leaders Fund 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 Fund which would limit the total operating expenses of the Fund through October 31, 2017, as well as a Business Management Agreement with Brown Advisory pursuant to which Brown Advisory would provide certain business management services to the Fund. 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.
Following their consideration and review of these matters, the Trustees determined that the Investment Advisory Agreement with the Adviser with respect to the Global Leaders Fund would enable shareholders of the Fund to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. Accordingly, the Board, including a majority of the Independent Trustees, unanimously approved the Investment Advisory Agreement for the Global Leaders Fund. 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 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 to be provided. The Trustees concluded that Brown Advisory is capable of providing high quality services to the Fund, 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 investment team who will be responsible for the ongoing supervision and oversight of Brown Advisory Ltd.’s investment activities with respect to the Fund, Brown Advisory’s investment and compliance oversight processes, and the competitive investment performance of the other Funds in the Trust. The Trustees also
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
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 Fund’s 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 the Global Leaders 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 Fund are competitive with industry averages. The Trustees also noted that Brown Advisory had proposed a contractual commitment for the benefit of shareholders of the Global Leaders Fund to limit the Fund’s operating expenses through October 31, 2017. The Board also focused on Brown Advisory’s projected level of profitability with respect to the Global Leaders Fund, 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 sub-advisory oversight services to be provided to the Fund by Brown Advisory, and the estimated level of profitability from Brown Advisory’s relationship with the Global Leaders Fund, 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 Global Leaders Fund grows and whether the advisory fees reflect possible economies of scale. While it was noted that the Global Leaders 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 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 advisory fees payable to Brown Advisory with respect to the Global Leaders Fund, in the future at which time the implementation of fee breakpoints on the Fund could be considered.
Benefits to Brown Advisory from its relationship with the Global Leaders Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by Brown Advisory from its relationship with the Global Leaders Fund, including any potential “soft dollar” benefits in connection with the Fund’s brokerage transactions and use of the Global Leaders 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. In addition, the Trustees determined that the Global Leaders Fund will benefit from its 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 Fund 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 Global Leaders Fund in light of the nature and quality of the services to be provided and the necessity of the services for the Global Leaders Fund’s operations.
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 Global Leaders Fund in a professional manner that is consistent with the best interests of the Fund and its shareholders. The Board also considered 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 the Sub-Adviser, 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 Global Leaders Fund, 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 Global Leaders Fund’s 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.
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
The Board also considered various matters with respect to the proposed distribution and shareholder servicing arrangements applicable to the Global Leaders Fund and they considered the distribution fees and the non-distribution shareholder servicing fees payable with respect to certain of the share classes of the Fund, 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 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 Fund 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 Brown Advisory by the Global Leaders Fund pursuant to which Brown Advisory will provide certain business management services to the Fund, 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 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 November 5, 2014 Board meeting and their February 12, 2015 Board meeting, at which meetings they had considered various matters with respect to the proposed establishment and operation of the Global Leaders Fund, and had received presentations from the proposed portfolio manager for the Fund. 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 Global Leaders Fund and its shareholders and also reflected management’s overall commitment to the growth and development of the Fund.
| 5. | Board of Trustees Approval of the Adoption of the Sub-Investment Advisory Agreement With Respect to the Brown Advisory Global Leaders Fund |
At their May 6, 2015 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 its affiliate Brown Advisory Ltd. 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 Global Leaders 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 Trustees carefully considered the relevant allocation of services between the Investment Advisory Agreement and the Sub-Investment Advisory Agreement, the nature and extent of the fee split between the Adviser and the Sub-Adviser, and the duties and responsibilities for the management and operation of the Fund as set forth in each of the Agreements. The Trustees took into consideration the affiliated status of Brown Advisory and the Sub-Adviser as a result of their being under common control and they concluded that this was beneficial because of the common management and operations shared by the two firms and the close working relationship that exists between the two firms as indicated by the representatives of Brown Advisory and 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. The Board also took note of the extensive experience of the proposed portfolio manager for the Fund, and the presentations that the proposed portfolio manager had previously made to the members of the Board regarding his experience and his plans for the management of the Global Leaders Fund through his position with the Sub-Adviser. The Board took note of the fact that the Sub-Adviser had not previously served as the sub-adviser to an SEC-registered mutual fund, but they considered that as a result of the close working relationship between the Sub-Adviser and Brown Advisory, the Sub-Adviser can benefit from the experience of Brown Advisory in managing each of the other Funds in the Trust and overseeing the operations of sub-advisers to SEC-registered mutual funds. 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 Global Leaders 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 New Fund and its shareholders. In reaching these conclusions, the Board considered the following:
Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds;(ii) the Continuation of the Sub-Advisory Agreements for Certain of the Funds, and (iii) the
Adoption of the Investment Advisory Agreement and a Sub-Investment Advisory Agreement
for One of the Funds (Unaudited)
The nature, extent and quality of the advisory services to be provided. The Trustees concluded that Brown Advisory Ltd. is capable of providing high quality sub-advisory services to the Global Leaders Fund, as indicated by the nature and quality of services provided to its other managed accounts, professional qualifications and experience of the proposed portfolio manager, and the firm’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 Brown Advisory Ltd., the Trustees concluded that the Sub-Adviser is capable of generating a level of long-term investment performance that is appropriate in light of the Global Leaders 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 Global Leaders Fund are competitive with industry averages. The Trustees also noted that the Global Leaders 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, 2017. The Board also took note of the fact that the sub-advisory fee had been separately negotiated by the Adviser and the Sub-Adviser, which are affiliated parties, 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 the Sub-Adviser for sub-investment advisory services to be provided to the Global Leaders 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.
The extent to which economies of scale may be realized as the Global Leaders Fund grows and whether the advisory fees reflect possible economies of scale. While it was noted that the Global Leaders 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 the Sub-Adviser 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 Global Leaders 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 the Sub-Adviser from its relationship with the Global Leaders Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by the Sub-Adviser from its relationship with the Global Leaders 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 the Sub-Adviser 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 Global Leaders Fund and its shareholders. The Board also considered matters with respect to the brokerage practices of the Sub-Adviser, 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 and Brown Advisory Ltd., as well as the information and materials that they had been provided with in connection with their November 5, 2014 Board meeting and also at their February 12, 2015 Board meeting, at which meetings they had considered various matters with respect to the proposed establishment and operation of the Global Leaders Fund and had received presentations from the proposed portfolio manager for the 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 the Sub-Adviser to its other investment advisory clients and they found that these services will benefit the Global Leaders Fund and its shareholders. They also considered the nature of the allocation of the duties and responsibilities for the management and operation of the Global Leaders Fund between Brown Advisory and the Sub-Adviser, and they determined that the sub-advisory fee, as negotiated by Brown Advisory and the Sub-Adviser, reasonably reflected the nature and extent of the services to be provided by the Sub-Adviser with respect to the Global Leaders Fund.
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.
BROWN ADVISORY FUNDS
At Brown Advisory, we believe that you deserve frank and open communication on all aspects of our relationship. In this spirit, we provide this annual summary of our policies relating to confidentiality and privacy of client information, mutual funds, conflicts of interest, trading commissions, proxy voting and Form ADV annual notice.
CONFIDENTIALITY AND PRIVACY POLICY
Brown Advisory takes the confidentiality of your personal information and the privacy of your account very seriously. Our commitment to safeguard your personal information goes beyond our legal obligation to process your transactions accurately and securely. Whether we serve you online, in person, on the telephone or by mail, the principles that guide the way in which we conduct business are built upon the core values of trust and integrity.
We limit access to your personal information to only those employees with a business reason to know such information. We train and consistently remind all employees to respect client privacy and to recognize the importance of the confidentiality of such information. Those who violate our privacy policy are subject to disciplinary action. This commitment also applies to the sharing of information among Brown Advisory and its affiliates.
We maintain physical, electronic and procedural safeguards that comply with applicable laws and regulations to protect your personal information, including various measures to protect your personal information while it is stored electronically.
Federal law requires us to inform you that we have on record personal information about you and that we obtain such information from you directly (e.g., information you provide to us on account applications and other forms, such as your name, address, social security number, occupation, assets and income) and indirectly (e.g., information on our computer systems about your transactions with us, such as your account balance and account holdings). Any personal information you choose to provide is kept confidential and allows us to: (i) provide better and more complete investment and strategic advice; (ii) develop new services that meet additional needs you may have; and, (iii) comply with legal and regulatory requirements.
In addition, in the normal conduct of our business, it may become necessary for us to share information relating to our clients that we have on record, as described above, with companies not affiliated with us who are under contract to perform services on our behalf. For example, we have contracted with companies to assist us in complying with anti-terrorist and anti-money laundering statutory requirements (including the identification and reporting of activities that may involve terrorist acts or money laundering activities), companies that provide clearing services, and other vendors that provide services directly related to your account relationship with us. Our agreements with these companies require that they keep your information confidential and not use such information for any unrelated purpose.
We do not sell information about you to third parties, and we do not otherwise disclose information to third parties without your permission or unless required by law.
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 |
| Multi-Strategy Fund | BAFRX | 115233488 | — | — | — | — |
| Global Leaders Fund | — | — | BIALX | 115233462 | — | — |
| 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.
BX-SEMIANNUAL
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 Principal Executive Officer and Principal Financial Officer 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, Principal Executive Officer
Date March 2, 2016
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, Principal Executive Officer
Date March 2, 2016
By (Signature and Title)* /s/Jason T. Meix
Jason T. Meix, Principal Financial Officer
Date March 2, 2016
* Print the name and title of each signing officer under his or her signature.
