UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: (811-22708)
Brown Advisory Funds
(Exact name of Registrant as specified in charter)
(Exact name of Registrant as specified in charter)
901 South Bond Street Suite 400
Baltimore, MD 21231
(Address of principal executive offices) (Zip code)
(Address of principal executive offices) (Zip code)
Paul J. Chew
Principal Executive Officer
Brown Advisory Funds
901 South Bond Street Suite 400
Baltimore, MD 21231
(Name and address of agent for service)
(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, 2018
Item 1. Reports to Stockholders.
SEMI-ANNUAL REPORT
December 31, 2018
Brown Advisory Growth Equity Fund
Brown Advisory Flexible Equity Fund
Brown Advisory Equity Income Fund
Brown Advisory Sustainable Growth Fund
Brown Advisory Mid-Cap Growth Fund
Brown Advisory Small-Cap Growth Fund
Brown Advisory Small-Cap Fundamental Value Fund
Brown Advisory Global Leaders Fund
Brown Advisory Intermediate Income Fund
Brown Advisory Total Return Fund
Brown Advisory Strategic Bond Fund
Brown Advisory Sustainable 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 – Beutel Goodman Large-Cap Value Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund's annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (www.brownadvisory.com/mf), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or a bank) or, if you are a direct investor, by calling (800) 540-6807 or by enrolling at www.brownadvisory.com/mf.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. If you invest directly with the Fund, you can call (800) 540-6807 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all Funds held in your account if you invest through your financial intermediary or all Funds held with the fund complex if you invest directly with the Funds.
TABLE OF CONTENTS
Brown Advisory Growth Equity Fund | 1 |
Brown Advisory Flexible Equity Fund | 4 |
Brown Advisory Equity Income Fund | 8 |
Brown Advisory Sustainable Growth Fund | 11 |
Brown Advisory Mid-Cap Growth Fund | 14 |
Brown Advisory Small-Cap Growth Fund | 18 |
Brown Advisory Small-Cap Fundamental Value Fund | 24 |
Brown Advisory Global Leaders Fund | 28 |
Brown Advisory Intermediate Income Fund | 31 |
Brown Advisory Total Return Fund | 35 |
Brown Advisory Strategic Bond Fund | 41 |
Brown Advisory Sustainable Bond Fund | 50 |
Brown Advisory Maryland Bond Fund | 55 |
Brown Advisory Tax-Exempt Bond Fund | 60 |
Brown Advisory Mortgage Securities Fund | 65 |
Brown Advisory – WMC Strategic European Equity Fund | 75 |
Brown Advisory – WMC Japan Alpha Opportunities Fund | 79 |
Brown Advisory – Somerset Emerging Markets Fund | 84 |
Brown Advisory – Beutel Goodman Large-Cap Value Fund | 88 |
Statements of Assets and Liabilities | 91 |
Statements of Operations | 96 |
Statements of Changes in Net Assets | 101 |
Financial Highlights | 111 |
Notes to Financial Statements | 119 |
Additional Information | 134 |
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 the date of this report 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 the date of this report. 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.
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).
Bloomberg 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.
Bloomberg 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 Bloomberg Barclays US Aggregate Bond Index.
Bloomberg Barclays Mortgage Backed Securities Index is a market value-weighted index which covers the mortgage-backed securities component of the Bloomberg 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.
Bloomberg 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.
Bloomberg Barclays US Corporate High Yield Index measures the US Dollar denominated, high-yield, fixed-rate corporate bond market.
Basis point(s) (bps) 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.
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 AC Asia ex Japan SMID Cap Index captures mid and small-cap representation across 2 of 3 Developed Markets (DM) countries (excluding Japan) and 8 Emerging Markets (EM) countries in Asia. With 2,001 constituents, the index covers approximately 28% of the free float-adjusted market capitalization in each country. DM countries in the index include: Hong Kong and Singapore. EM countries include: China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand.
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 (P/B) 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 Midcap Growth Index measures the performance of the mid-capitalization growth sector of the U.S. equity market.
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 500 Index (“S&P 500”) is a market-value weighted index representing the performance of 500 widely held, publicly traded large capitalization stocks.
Tangible Book Value (“TBV”) is a valuation ratio expressing the price of a security compared to its hard, or tangible, book value as reported in the company’s balance sheet. The tangible book value number is equal to the company’s total book value less the value of any intangible assets.
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, known as the TOPIX Total Return 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, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Growth Equity Fund – Investor Shares (the “Fund”) decreased 7.80% value. During the same period, the Russell 1000® Growth Index (the “Index”), the Fund’s benchmark, decreased 8.17%.
Market volatility took a pronounced step higher over the last six months. There were 17 days from October through December in which the Index was up or down 2% or more for the day–compared to just 10 days for the full calendar year and none in the entirety of 2017–highlights this volatility. The Index fell nearly 16% in the last three months of 2018 ending the six-month period down just over 8%.
The narrative has not changed dramatically, yet the market has seemingly developed an increased sensitivity to the news flow lately. Concerns of the Federal Reserve missing the target on interest rates juxtaposed with inflationary pressures and the prospect of a cooling global economy continue dominating financial headlines.
Stock selection in health care was a standout contributor. A combination of several names that we purchased in recent years, including Dexcom, Thermo Fisher, and Edwards Lifesciences, were joined by longtime holding Danaher, which we have held for more than a decade, all provided strong positive contributions. Dexcom, which was the best-performing stock in the portfolio, manufactures an industry-leading continuous glucose monitoring (CGM) device, used by diabetics to monitor their blood sugar levels in real time. A series of rapid-succession approvals by the FDA and Medicare reimbursement approval for Dexcom and several competitors have validated the importance of CGM in the treatment and management of diabetes. This expanded awareness has created what we believe is a massive market opportunity, and we believe that Dexcom is positioned well to capitalize on it.
While the technology sector was negative in absolute terms for the period, it was one of the bigger positive contributors on a relative basis. This was partially due to weakness in several stocks that we do not own, such as Apple, NVIDIA and IBM, which are meaningful weights in the benchmark. Software company Salesforce.com and credit service PayPal were two of our top contributors for the period. Both of these companies have continued to take advantage of unique market opportunities and have been successful at growing faster than market expectations.
The recently reformed communications services sector was a detractor this period, primarily due to the performance of Electronic Arts, which was the worst-performing stock in the Fund. The company is one of the world’s leading video game publishers. The video game industry is experiencing secular growth and a structural profitability tailwind as consumers purchase a greater proportion of console video game services digitally. We also believe that an ample opportunity remains to improve monetization of gamers’ playing time, which is much lower than other forms of entertainment. Electronic Arts offers a stable portfolio of titles anchored by its sports franchises, FIFA in particular, which has global appeal. The company experienced several setbacks, some of which, in our view, were self-inflicted. However, our investment thesis remains intact and management has demonstrated the ability to bounce back from these obstacles in the past.
In terms of portfolio positioning we eliminated Facebook from the portfolio to fund a new position in Microsoft. Facebook remains in the crosshairs of regulatory and consumer backlash as a result of its missteps with data governance practices. This should undoubtedly weigh on its ability to grow as profitably as it has in the past. Given these challenges, we reallocated the capital to a business that we believe has greater visibility and offers a more compelling profile of upside potential versus downside risk.
We are pleased with the performance of the Fund, especially during periods of increased market volatility. The core of our investment approach is holding companies with strong fundamentals, which is one of the weapons we have to combat market volatility. Further, our investment process seeks to protect investors’ capital in volatile markets by also focusing on a company’s business model, their end-market diversification and their time-tested sensitivity to excessive valuation.
We understand and appreciate that we are not going to win the relative performance game every year, but we believe that maintaining a steadfast discipline with our investment process in both favorable and difficult market conditions is crucial to adding value over the long term.
Sincerely,
Kenneth M. Stuzin, CFA
Portfolio Manager
1
Brown Advisory Growth Equity Fund
A Message to Our Shareholders
December 31, 2018
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.
2
Brown Advisory Growth Equity Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 93.0% | ||||||||
Communication Services — 6.5% | ||||||||
61,845 | Alphabet, Inc. — Class C* | 64,047,301 | ||||||
642,197 | Electronic Arts, Inc.* | 50,675,765 | ||||||
114,723,066 | ||||||||
Consumer Discretionary — 12.1% | ||||||||
259,948 | Alibaba Group Holding, Ltd. ADR* | 35,631,072 | ||||||
52,211 | Amazon.com, Inc.* | 78,419,356 | ||||||
30,581 | Booking Holdings, Inc.* | 52,673,326 | ||||||
1,047,189 | TJX Companies, Inc. | 46,851,236 | ||||||
213,574,990 | ||||||||
Consumer Staples — 5.8% | ||||||||
255,141 | Costco Wholesale Corp. | 51,974,773 | ||||||
391,785 | Estee Lauder Companies, Inc. | 50,971,228 | ||||||
102,946,001 | ||||||||
Health Care — 21.2% | ||||||||
546,511 | Danaher Corp. | 56,356,214 | ||||||
464,858 | DexCom, Inc.* | 55,689,988 | ||||||
290,633 | Edwards Lifesciences Corp.* | 44,516,257 | ||||||
151,463 | Intuitive Surgical, Inc.* | 72,538,660 | ||||||
293,289 | Thermo Fisher Scientific, Inc. | 65,635,145 | ||||||
950,383 | Zoetis, Inc. | 81,295,762 | ||||||
376,032,026 | ||||||||
Industrials — 11.1% | ||||||||
760,764 | BWX Technologies, Inc. | 29,084,008 | ||||||
290,102 | Cintas Corp. | 48,734,235 | ||||||
822,271 | Fortive Corp. | 55,634,856 | ||||||
235,845 | Roper Technologies, Inc. | 62,857,409 | ||||||
196,310,508 | ||||||||
Information Technology — 33.0% | ||||||||
228,819 | Adobe, Inc.* | 51,768,011 | ||||||
633,603 | Amphenol Corp. | 51,334,515 | ||||||
370,234 | Autodesk, Inc.* | 47,615,795 | ||||||
135,907 | FleetCor Technologies, Inc.* | 25,240,648 | ||||||
1,509,773 | Genpact, Ltd. | 40,748,773 | ||||||
349,404 | Intuit, Inc. | 68,780,178 | ||||||
506,107 | Microsoft Corp. | 51,405,288 | ||||||
456,219 | NXP Semiconductors NV | 33,431,728 | ||||||
832,970 | PayPal Holdings, Inc.* | 70,044,447 | ||||||
473,967 | salesforce.com, Inc.* | 64,919,260 | ||||||
604,865 | Visa, Inc. | 79,805,888 | ||||||
585,094,531 | ||||||||
Materials — 3.3% | ||||||||
150,704 | Sherwin-Williams Co. | 59,295,996 | ||||||
Total Common Stocks (Cost $1,022,787,260) | 1,647,977,118 | |||||||
Real Estate Investment Trusts — 3.5% | ||||||||
389,964 | SBA Communications Corp.* | 63,131,272 | ||||||
Total Real Estate Investment Trusts (Cost $36,316,692) | 63,131,272 | |||||||
Short-Term Investments — 3.4% | ||||||||
Money Market Funds — 3.4% | ||||||||
60,224,037 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 60,224,037 | |||||||
Total Short-Term Investments (Cost $60,224,037) | 60,224,037 | |||||||
Total Investments — 99.9% (Cost $1,119,327,989) | 1,771,332,427 | |||||||
Other Assets in Excess of Liabilities — 0.1% | 897,286 | |||||||
NET ASSETS — 100.0% | $ | 1,772,229,713 |
ADR — American Depositary Receipt
* | Non-Income Producing |
# | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Information Technology | 33.0% |
Health Care | 21.2% |
Consumer Discretionary | 12.1% |
Industrials | 11.1% |
Communication Services | 6.5% |
Consumer Staples | 5.8% |
Real Estate Investment Trusts | 3.5% |
Money Market Funds | 3.4% |
Materials | 3.3% |
Other Assets and Liabilities | 0.1% |
100.0% |
The accompanying notes are an integral part of these financial statements.
3
Brown Advisory Flexible Equity Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Flexible Equity Fund – Investor Shares (the “Fund”) decreased 9.15% in value, as compared to the return of the S&P 500® Index (the “Index”), the Fund’s benchmark, which declined 6.85%.
The U.S. stock market fell sharply in the fourth quarter from the highs reached in the third quarter. Specifically, the total return of the Fund’s benchmark, the S&P 500 Index, was + 7.7% in the third quarter and -13.5% in the fourth quarter. Since we like lower prices when we put capital to work, we were more actively buying than selling.
Since September, the mood of the market devolved from confident to concerned as focus turned to the length of time (10 years) since the last retreat in global economic activity. This concern was exacerbated by signs of slowing economic expansion, fears about the effects of higher interest rates (10-year U.S. Treasury rates had more than doubled from their low of 1.4% in July 2016), a flattened and almost inverted U.S. yield curve (sometimes a signal of a recession to come), the U.S. election results (moving from one-party to two-party control in Congress), a 40% decline in the price of oil, U.S. trade tensions with China and a federal budget impasse leading to a U.S. government shutdown. Interestingly, these news items, or their ilk, have all happened before in modern economic and financial history. They are the “usual suspects” for a market retreat, especially after sustained gains, and all are subject to change. As stocks declined, bonds rallied strongly, which begins to relieve the pressure point of higher interest rates we noted above. At current interest rates and equity valuations, we continue to view stocks as more attractive than bonds.
Prices can swing far above or below prior levels or long-term values depending on the actual events and the perceptions, fears and dreams of investors. Markets can be placid, but the potential for volatility always remains. On the other hand, human ingenuity, economic and business progress, and moderate rates of inflation are usually reflected in higher business values and, short-term volatility aside, higher security prices over time.
In our Annual Report commentary, we discussed “growth” stocks and “value” stocks, putting these labels in quotes because the stocks themselves do not innately and immutably possess these traits. Investors assign these labels to companies based on recent results and expectations for the future—or, in the case of style-based indices, largely by sorting the highest valuation stocks into the “growth” category and the lowest into the “value” category. In reasonably efficient markets, neither type of investment should be expected to permanently outperform the other, despite periodic long runs favoring one or the other. In recent years, “growth” stocks have outperformed “value” stocks, but in the fourth quarter, as markets retreated, “value” outperformed “growth” perhaps as “value,” not having gained so much as “growth” previously, had less to retreat.
The Fund contains both “growth” and “value” stocks as the market labels them, but we have neither a value nor a growth style of investing. We always want to get a lot for our money, so investors should think of us first as having a value philosophy. However, we recognize that companies that can grow their sales and earnings while earning a strong return on invested capital offer more favorable long-term prospects to investors than those that cannot, so investors can think of us as having a growth philosophy as well. We distinguish philosophy from style because value judgements are subjective, more so than objectively quantifiable.
Please note that the presentation in the Schedule of Investments has changed to reflect the Global Industry Classification Standard’s (GICS) changes in the classifications of companies across economic sectors—enlarging the communications sector. GICS was developed by MSCI and Standard and Poor’s in the 1990s to provide the financial community with a reliable, complete and standard approach to classifying stocks—this change represents its latest evolution. Portfolio holdings Alphabet, Inc. Class A & Class C and Facebook, Inc. moved from the information technology sector and Walt Disney Co. from consumer discretionary sector into the new communications services sector. The reclassifications do not affect our views on the companies, how we manage or what we hold in the portfolio, but we believe that this change is an improvement in its methodology. This change also makes the balance that we believe exists in our portfolio more apparent. For example, we now appear less overweight in the technology sector since two of our larger holdings moved to the communications services sector, but again, we did not change our holdings. We think about balance in terms of the aggregation of company business characteristics rather than economic sectors and relative sector weightings. We prefer balance over the larger skewing some may see in style-driven (value versus growth) portfolios. As usual, there were some changes in the portfolio holdings at the margin, but nothing that changes the character of the portfolio.
4
Brown Advisory Flexible Equity Fund
A Message to Our Shareholders
December 31, 2018
The biggest contributors to returns in the six-month period were Berkshire Hathaway, Inc. Class B, a diversified insurance and industrial company (Warren Buffett’s company); Merck & Co., a pharmaceutical manufacturer; Edwards Lifesciences, a manufacturer and marketer of medical devices to treat late-stage cardiovascular disease; Chipotle Mexican Grill, Inc., a fast casual restaurant chain; and Anthem, Inc., a managed health care company. All of the top contributors benefited from good business results and rising valuations.
The largest detractors to returns were Facebook, Inc., a leader in social media; Conagra Brands, a packaged food company; Ameriprise Financial, Inc., a diversified financial services firm; Suncor Energy Inc,, a Canadian integrated energy company; and Apple Inc., a manufacturer of various personal digital, computing and communications devices.
Facebook’s decline reflected investors’ concerns regarding slowing growth and the possibility of government regulations. We believe that Facebook is difficult to replicate or replace and while not essential to users’ lives, is an important source of entertainment that may produce healthy and growing profits for years to come. We viewed the drop in share price as an opportunity to add to our holding.
Conagra Brands disappointed investors with its quarterly results and the outlook for its recently acquired Pinnacle Foods business. Energy and financial stocks were generally lower for the period; Ameriprise Financial and Suncor declined. Apple fell on news that several suppliers of components were revising their revenue outlook, implying that Apple was experiencing a decline in iPhone unit demand.
We added several new holdings and eliminated four since our June 30, 2018 Annual Report to shareholders.
New investments include Alibaba Group Holding Ltd., the largest e-commerce company in China; Amazon.com, a leading online retailer and provide of cloud services; Cimarex Energy Co., an oil and gas exploration and production company; DowDuPont Inc., a specialty materials producer; and Taiwan Semiconductor Manufacturing, a leading producer of semiconductors.
We participated in a tender offer from Altaba to exchange a portion of our shares for cash as well as shares in Alibaba, which has continued growing at a rapid clip both in China and other regions in Asia. Its other investments (e.g., cloud computing and Alipay) continue showing progress and are garnering additional market share.
The recent decline in Amazon’s share price gave us an opportunity to invest in a market leader that we believe has strong future growth prospects and excellent entrepreneurial leadership of founder and CEO Jeff Bezos.
Cimarex Energy has production assets primarily in the Permian Basin in western Texas and Mid-Continent region in Oklahoma. Management has been focused on generating an attractive return on invested capital over the full commodity cycle and well lives. We believe that earnings have the potential to improve as bottleneck issues related to the transportation of oil and gas from the Permian Basin may be resolved with new pipeline capacity next year.
We view the merger of Dow and DuPont, two leading chemical and materials companies, under the leadership of Ed Breen as a positive development and believe that the company is making strides in rationalizing its cost structures. We believe that its decision to divide the company into three more-focused companies later in 2019 has the potential to enhance its ability to create value.
Taiwan Semiconductor Manufacturing is the leading producer of semiconductors for semiconductor companies that do not have their own chip manufacturing facilities called foundries. We believe Taiwan Semiconductor has advantages of technical skill and intellectual property trust vs. competitors, enabling it to potentially earn and sustain attractive returns in its business.
We sold our investments in Aetna, Inc., a health care benefits company; Chipotle Mexican Grill Inc., a fast casual restaurant; Occidental Petroleum Corp., an integrated energy company; and PepsiCo, Inc., a leading beverage and snack food company. We eliminated Aetna, recently acquired by CVS, in favor of further building our position in Anthem, a managed health care company which we believe has better upside potential. Chipotle Mexican Grill was sold as its valuation expanded reflecting a more positive view of the company following a management change.
We reinvested these proceeds, as well as those from Occidental Petroleum and PepsiCo, into holdings that we believe have better upside potential.
We search for what we believe to be investment bargains among long-term attractive businesses with shareholder-oriented managers. These businesses should have or develop competitive advantages that have the potential to result in good business economics, managers who allocate capital well, capacity to adjust to changes in the world and the ability to grow business value over time. Bargains in these types of stocks can arise for various reasons, but are often due to short-term investor perceptions,
5
Brown Advisory Flexible Equity Fund
A Message to Our Shareholders
December 31, 2018
temporary business challenges that will improve, company or industry changes for the better, or as-yet-unrecognized potential for long-term growth and development. Despite the occasional investment that will go awry, we are optimistic about the long-term outlook for equities of good businesses purchased at reasonable prices and our potential to find them. To that end, our equity research team is smart, enterprising, and motivated in this search.
Sincerely,
R. Hutchings Vernon, CFA
Portfolio Manager
Maneesh Bajaj, CFA
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 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.
6
Brown Advisory Flexible Equity Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 94.8% | ||||||||
Communication Services — 9.8% | ||||||||
5,631 | Alphabet, Inc. — Class A* | 5,884,170 | ||||||
13,724 | Alphabet, Inc. — Class C* | 14,212,712 | ||||||
100,082 | Facebook, Inc.* | 13,119,749 | ||||||
57,561 | Walt Disney Co. | 6,311,564 | ||||||
39,528,195 | ||||||||
Consumer Discretionary — 12.9% | ||||||||
17,465 | Alibaba Group Holding, Ltd. ADR* | 2,393,927 | ||||||
2,831 | Amazon.com, Inc.* | 4,252,077 | ||||||
6,854 | Booking Holdings, Inc.* | 11,805,467 | ||||||
214,901 | CarMax, Inc.* | 13,480,740 | ||||||
70,397 | eBay, Inc.* | 1,976,044 | ||||||
158,887 | Lowe’s Companies, Inc. | 14,674,803 | ||||||
80,351 | TJX Companies, Inc. | 3,594,904 | ||||||
52,177,962 | ||||||||
Consumer Staples — 2.7% | ||||||||
230,720 | Conagra Brands, Inc. | 4,928,179 | ||||||
366,827 | Nomad Foods, Ltd.* | 6,133,348 | ||||||
11,061,527 | ||||||||
Energy — 4.5% | ||||||||
65,034 | Cimarex Energy Co. | 4,009,346 | ||||||
514,851 | Kinder Morgan, Inc. | 7,918,408 | ||||||
221,345 | Suncor Energy, Inc. | 6,191,020 | ||||||
18,118,774 | ||||||||
Financials — 22.4% | ||||||||
78,002 | Ameriprise Financial, Inc. | 8,141,069 | ||||||
392,647 | Bank of America Corp. | 9,674,822 | ||||||
97,712 | Berkshire Hathaway, Inc.* | 19,950,836 | ||||||
287,594 | Charles Schwab Corp. | 11,943,779 | ||||||
137,660 | JPMorgan Chase & Co. | 13,438,369 | ||||||
272,692 | KKR & Co., Inc. | 5,352,944 | ||||||
577,223 | Regions Financial Corp. | 7,723,244 | ||||||
34,601 | T. Rowe Price Group, Inc. | 3,194,364 | ||||||
247,514 | Wells Fargo & Co. | 11,405,445 | ||||||
90,824,872 | ||||||||
Health Care — 9.5% | ||||||||
31,906 | Anthem, Inc. | 8,379,473 | ||||||
86,474 | Edwards Lifesciences Corp.* | 13,245,222 | ||||||
50,819 | Merck & Co., Inc. | 3,883,080 | ||||||
51,093 | UnitedHealth Group, Inc. | 12,728,288 | ||||||
38,236,063 | ||||||||
Industrials — 6.1% | ||||||||
67,898 | Canadian National Railway Co. | 5,031,921 | ||||||
121,999 | Delta Air Lines, Inc. | 6,087,750 | ||||||
28,599 | General Dynamics Corp. | 4,496,049 | ||||||
34,563 | United Rentals, Inc.* | 3,543,744 | ||||||
51,157 | United Technologies Corp. | 5,447,197 | ||||||
24,606,661 | ||||||||
Information Technology — 25.4% | ||||||||
56,547 | Accenture PLC | 7,973,693 | ||||||
93,036 | Apple, Inc. | 14,675,499 | ||||||
23,322 | Broadcom, Inc. | 5,930,318 | ||||||
107,125 | MasterCard, Inc. | 20,209,131 | ||||||
158,249 | Microsoft Corp. | 16,073,351 | ||||||
98,171 | PayPal Holdings, Inc.* | 8,255,199 | ||||||
116,078 | Taiwan Semiconductor | |||||||
Manufacturing Co., Ltd. ADR | 4,284,439 | |||||||
192,745 | Visa, Inc. | 25,430,775 | ||||||
102,832,405 | ||||||||
Materials — 1.5% | ||||||||
115,652 | DowDuPont, Inc. | 6,185,069 | ||||||
Total Common Stocks (Cost $251,678,906) | 383,571,528 | |||||||
Real Estate Investment Trusts — 2.4% | ||||||||
39,605 | Crown Castle International Corp. | 4,302,291 | ||||||
34,038 | SBA Communications Corp.* | 5,510,412 | ||||||
Total Real Estate Investment Trusts (Cost $8,223,506) | 9,812,703 | |||||||
Closed-End Funds — 1.7% | ||||||||
117,285 | Altaba, Inc.* | 6,795,492 | ||||||
Total Closed-End Funds (Cost $3,492,278) | 6,795,492 | |||||||
Short-Term Investments — 0.2% | ||||||||
Money Market Funds — 0.2% | ||||||||
883,004 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 883,004 | |||||||
Total Short-Term Investments (Cost $883,004) | 883,004 | |||||||
Total Investments — 99.1% (Cost $264,277,694) | 401,062,727 | |||||||
Other Assets in Excess of Liabilities — 0.9% | 3,507,156 | |||||||
NET ASSETS — 100.0% | $ | 404,569,883 |
ADR — American Depositary Receipt
* | Non-Income Producing |
# | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Information Technology | 25.4% |
Financials | 22.4% |
Consumer Discretionary | 12.9% |
Communication Services | 9.8% |
Health Care | 9.5% |
Industrials | 6.1% |
Energy | 4.5% |
Consumer Staples | 2.7% |
Real Estate Investment Trusts | 2.4% |
Closed-End Funds | 1.7% |
Materials | 1.5% |
Money Market Funds | 0.2% |
Other Assets and Liabilities | 0.9% |
100.0% |
The accompanying notes are an integral part of these financial statements.
7
Brown Advisory Equity Income Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Equity Income Fund - Investor Shares (the “Fund”) decreased 5.27% in value. During the same period, the Fund’s benchmark, the S&P 500® Index (the “Index”), decreased 6.85%.
The third and fourth quarters of 2018 were polar opposites for U.S. stocks. In the third quarter, the Index posted its best single quarter of performance in nearly five years as every constituent sector increased. However, those gains were more than completely erased by a broad market sell-off in the fourth quarter that accelerated during December and saw the Index hit a 20-month low on Christmas Eve. Worries about rising interest rates and the impact of U.S tariffs on trade formed a year-end backdrop for investors of slowing future earnings growth. In line with its historical goal of providing capital protection in declining markets, the Fund outperformed the Index during this period of rapidly deteriorating investor sentiment.
The health care sector was the best-performing sector for the Fund during the six-month period in which only three of the 11 sectors in the Index posted positive returns. In particular, pharmaceutical holding Merck posted strong quarterly earnings results as its important cancer drug Keytruda continued to gain market share with doctors and patients. Fellow pharmaceutical peer Novartis was also a strong performer because of a brighter outlook for its coming lineup of high-margin specialty drugs. Lastly within health care, we added Gilead Sciences after the stock price declined to what we believe to be a reasonable level during the December sell-off. Among other positive investment attributes, Gilead has a solid franchise in HIV drugs and a historical commitment to dividend growth.
The Fund’s information technology holdings performed well on a relative basis during the period and declined less than the benchmark sector overall. This was despite a 30% drop in Apple shares in the fourth quarter amid indications that its latest generation of iPhones were selling at a slower rate than expected. Apple’s weakness in the period was offset by steady performance from fellow information technology holdings Microsoft and Cisco Systems. Both companies continued benefitting from a healthy spending environment as companies worldwide devoted more resources to their information technology systems.
Industrials and energy were the Fund’s worst-performing sectors during the period. In industrials, data measurement company Nielsen Holdings declined after reporting disappointing quarterly results and lowering its full-year financial guidance. We exited Nielsen due in part to an outlook for deteriorating cash flow that may eventually threaten the company’s dividend yield. Meanwhile, energy holdings Suncor Energy and Occidental Petroleum fell amid a 39% decline in the price of oil during the period. Despite the decline in commodity prices, we believe that both companies remain positioned well to potentially generate strong cash flows in the future. We added to our position in pipeline operator Kinder Morgan, which has had little unhedged exposure to changing oil prices.
The consumer staples sector also detracted from performance during the period. Most notably, U.S. cigarette maker Altria fell because of weaker-than-expected consumer demand for traditional cigarettes in favor of new e-cigarette products from competitors such as JUUL Labs Inc. In December, Altria announced a $12.8 billion investment in JUUL to support the e-cigarette company’s efforts to switch adult smokers away from traditional cigarettes. As a result, we trimmed our position in Altria as this dramatic strategic shift effectively changed the risk profile of the company and could impact Altria’s ability to return cash to shareholders at an attractive rate in the future.
The Global Industry Classification Standard (GICS) added a new sector during the period – the newly constituted communications services sector. This new sector was formed through the combination of the previous telecommunication services sector along with media companies from the consumer discretionary sector and internet-related companies from the information technology sector. New holding Comcast is the Fund’s only current investment in communications services, which is dominated by non-dividend paying stocks such as Alphabet, Facebook, and Netflix. We added Comcast late in the year as the market selloff intensified and price/earnings multiples fell across many sectors. We also added luxury retailer Tiffany & Co. at the same point in time. Both investments share common characteristics such as what we believe to be reasonable valuations, above-average dividend yields, strong balance sheets and cash flows, and attractive future growth potential.
8
Brown Advisory Equity Income Fund
A Message to Our Shareholders
December 31, 2018
Our investment process has focused on such attributes since the Fund’s inception. Remaining patient and disciplined paid off as market volatility increased in late 2018 and created a much better environment for long-term investors looking to buy high-quality companies at reasonable prices. As always, our ultimate goal in running this Fund is building a portfolio of investments that we believe has the potential to generate a reliable stream of growing income over time while also offering a level of capital preservation during those periods when it is needed.
Sincerely,
Brian Graney, CFA
Portfolio Manager
Earnings growth is not representative of the fund’s future performance.
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. 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.
9
Brown Advisory Equity Income Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 91.0% | ||||||||
Communication Services — 2.0% | ||||||||
46,787 | Comcast Corp. | 1,593,097 | ||||||
Consumer Discretionary — 11.3% | ||||||||
20,734 | Best Buy Co., Inc. | 1,098,073 | ||||||
18,236 | Hasbro, Inc. | 1,481,675 | ||||||
7,254 | Home Depot, Inc. | 1,246,382 | ||||||
12,323 | Lowe’s Companies, Inc. | 1,138,152 | ||||||
13,890 | McDonald’s Corp. | 2,466,447 | ||||||
10,535 | Tiffany & Co. | 848,173 | ||||||
12,764 | V.F. Corp. | 910,584 | ||||||
9,189,486 | ||||||||
Consumer Staples — 8.4% | ||||||||
24,408 | Altria Group, Inc. | 1,205,511 | ||||||
49,346 | Coca-Cola Co. | 2,336,533 | ||||||
17,562 | Philip Morris International, Inc. | 1,172,439 | ||||||
39,191 | Unilever NV ADR | 2,108,476 | ||||||
6,822,959 | ||||||||
Energy — 6.0% | ||||||||
115,038 | Kinder Morgan, Inc. | 1,769,285 | ||||||
23,672 | Occidental Petroleum Corp. | 1,452,987 | ||||||
59,466 | Suncor Energy, Inc. | 1,663,264 | ||||||
4,885,536 | ||||||||
Financials — 14.5% | ||||||||
15,500 | Ameriprise Financial, Inc. | 1,617,735 | ||||||
68,079 | Bank of America Corp. | 1,677,466 | ||||||
24,719 | Cincinnati Financial Corp. | 1,913,745 | ||||||
14,876 | Erie Indemnity Co. | 1,983,120 | ||||||
27,400 | JPMorgan Chase & Co. | 2,674,788 | ||||||
40,990 | Wells Fargo & Co. | 1,888,819 | ||||||
11,755,673 | ||||||||
Health Care — 16.1% | ||||||||
19,504 | AbbVie, Inc. | 1,798,074 | ||||||
12,736 | Gilead Sciences, Inc. | 796,637 | ||||||
19,210 | Johnson & Johnson | 2,479,050 | ||||||
17,318 | Medtronic PLC | 1,575,245 | ||||||
47,694 | Merck & Co., Inc. | 3,644,299 | ||||||
31,569 | Novartis AG ADR | 2,708,936 | ||||||
13,002,241 | ||||||||
Industrials — 6.3% | ||||||||
8,081 | General Dynamics Corp. | 1,270,414 | ||||||
42,643 | Healthcare Services Group, Inc. | 1,713,396 | ||||||
19,761 | United Technologies Corp. | 2,104,151 | ||||||
5,087,961 | ||||||||
Information Technology — 22.2% | ||||||||
14,325 | Accenture PLC | 2,019,968 | ||||||
20,348 | Apple, Inc. | 3,209,694 | ||||||
20,697 | Automatic Data Processing, Inc. | 2,713,791 | ||||||
7,162 | Broadcom, Inc. | 1,821,153 | ||||||
80,677 | Cisco Systems, Inc. | 3,495,734 | ||||||
46,022 | Microsoft Corp. | 4,674,455 | ||||||
17,934,795 | ||||||||
Materials — 4.2% | ||||||||
30,798 | DowDuPont, Inc. | 1,647,077 | ||||||
11,147 | Linde PLC | 1,739,378 | ||||||
3,386,455 | ||||||||
Total Common Stocks (Cost $48,907,511) | 73,658,203 | |||||||
Real Estate Investment Trusts — 7.0% | ||||||||
11,717 | American Tower Corp. | 1,853,512 | ||||||
35,206 | W.P. Carey, Inc. | 2,300,360 | ||||||
69,291 | Weyerhaeuser Co. | 1,514,701 | ||||||
Total Real Estate Investment Trusts (Cost $5,015,883) | 5,668,573 | |||||||
Short-Term Investments — 1.9% | ||||||||
Money Market Funds — 1.9% | ||||||||
1,524,791 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 1,524,791 | |||||||
Total Short-Term Investments (Cost $1,524,791) | 1,524,791 | |||||||
Total Investments — 99.9% (Cost $55,448,185) | 80,851,567 | |||||||
Other Assets in Excess of Liabilities — 0.1% | 77,318 | |||||||
NET ASSETS — 100.0% | $ | 80,928,885 |
ADR — American Depositary Receipt
# | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Information Technology | 22.2% |
Health Care | 16.1% |
Financials | 14.5% |
Consumer Discretionary | 11.3% |
Consumer Staples | 8.4% |
Real Estate Investment Trusts | 7.0% |
Industrials | 6.3% |
Energy | 6.0% |
Materials | 4.2% |
Communication Services | 2.0% |
Money Market Funds | 1.9% |
Other Assets and Liabilities | 0.1% |
100.0% |
The accompanying notes are an integral part of these financial statements.
10
Brown Advisory Sustainable Growth Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Sustainable Growth Fund – Institutional Shares (the “Fund”) decreased 5.26% in value. During the same period, the Fund’s benchmark, the Russell 1000® Growth Index (the “Index”), decreased 8.17%.
Strength in technology, health care and materials primarily drove the relative outperformance. Our overweight to health care also contributed to the outperformance. These positive factors more than offset negative performance from many of our industrial holdings.
The majority of our positive performance, since inception, has come during periods of market weakness and the results over the last six months are consistent with this trend. We believe that our strict valuation discipline, preference for high-quality companies and research that focuses on identifying some of the most persistent drivers of value creation for companies–including sustainability drivers–have contributed to these results. The majority of our portfolio consists of what we believe to be steady-growth companies with low double-digit bottom-line growth prospects. We believe that this helped provide ballast in the most recent period of macro weakness.
Taking a closer look at the last six months, our outperformance was fairly broad-based with strong contributions from companies in a variety of sectors. On October 28, 2018, IBM announced its intention to acquire Red Hat for more than a 60% premium to the previous day’s closing price. IBM intends to scale Red Hat’s hybrid cloud and open source technology by leveraging its vast distribution network. We used the strength in Red Hat to exit the position.
American Tower exceeded revenue expectations in the third quarter sending its shares higher. We believe that strong revenue growth has the potential to continue given a very active spending cycle by all four of the big carriers going forward. The company’s portfolio of tower assets around the world will be critical to meeting communications and bandwidth demands over the long term. While we slightly trimmed the position on strength during the period, it is a core position in the strategy.
Ball Corporation posted strong results during the period and the company navigated around headwinds, such as increased freight costs nicely. Global can volumes are up, including double-digit growth in specialty cans which is a meaningful amount of Ball’s total volumes. Aluminum is taking share from glass, and we believe this shift may accelerate over time. The company has used its strong cash flow to return capital to shareholders and we maintained our core position.
Finally, Danaher and Thermo Fisher benefitted from a strong spending environment across the health care landscape, especially in the biologics area. Given that we believe growth in research and biologic development is likely to continue, we maintained large positions in both companies.
In terms of our largest detractor, Facebook declined due to lowered profit expectations going forward. The company has to spend more than it originally anticipated a few years ago to fight a host of threats against its network. We exited our small position in Facebook during the quarter. We have previously written about reducing our position size given the elevated risks around privacy, data security, governance, and regulation. In monitoring the situation to assess whether these issues are systemic or isolated incidents, it has become clear to us that Facebook gave far greater data access to many technology companies beyond what it originally disclosed. At a minimum, these partnerships might have violated Facebook’s consent decree with the Federal Trade Commission. Ultimately it seems that Facebook deceived users and investors as to the extent of the data privacy issues. Unfortunately, in our opinion, Facebook’s management has demonstrated a systemic disregard for managing privacy, data security and regulatory risk.
Other detractors included Welbilt, J.B. Hunt Transport, Aptiv and A.O. Smith. During the period, Welbilt’s CEO, Hubertus Muhlhauser, surprisingly left the company to become chief executive of a large agricultural equipment company. We held Muhlhauser in high regard and were disappointed to hear of his resignation. Given that we built our fundamental thesis around Muhlhauser’s leadership, we exited the position. J.B. Hunt’s intermodal operation suffered an unanticipated slowdown in volume in its Western region which caused overall revenue growth to fall short of expectations. We added to our position in J.B. Hunt during the period given that we believe that the slowdown will likely be temporary. Weakness in global auto production caused investors to punish auto suppliers including Aptiv. While we anticipate Aptiv’s near-term results will suffer due to the slower end market, our long-term thesis is unchanged and we used the weakness to add to our position. Finally, A.O. Smith lowered its financial outlook given slower growth in China. The company is having a more difficult time growing its water heater sales and other products in China due to more cautious consumer spending. We took advantage of the weakness in A.O. Smith and added to our position as our long-term thesis remains intact.
11
Brown Advisory Sustainable Growth Fund
A Message to Our Shareholders
December 31, 2018
We added two new names to the portfolio during the last six months, Aspen Technology and Illumina. Aspen sells mission critical optimization software to energy, construction, engineering and chemical companies, helping these customers make their plants and supply chains more efficient, increasing production capacity and saving them billions of dollars over time. Aspen is the market leader and has amassed deep domain expertise over the last 35 years.
Illumina is a leading developer of life science tools and integrated systems for the analysis of genetic variation and function. The company provides sequencing and array-based solutions for genotyping and gene expression profiling of DNA and RNA. Illumina’s sustainable business advantage is its ability to drive the efficiency and productivity of diagnostics and therapeutics within the health system. The increased emphasis on preventative molecular medicine should help advance a new era of precision health care. Furthermore, identifying desirable traits in plants and animals may lead to healthier and more productive crops and livestock.
During the period, we eliminated Red Hat given that we do not believe there will be another bidder besides IBM, and we redeployed those proceeds into a number of existing holdings. We also eliminated Welbilt and Facebook as we previously discussed.
We are encouraged by our relative outperformance during the period. We maintain a disciplined process of discerning high-quality names poised for steady success–even in uncertain operating environments. After all, sustainable growth requires management teams to be resilient against many challenges, including constraints on the natural environment and resources. Our deep sustainability research helps us identify the companies that have been making the right long-term investments, for many years now, toward their own long-term sustainability and growth.
While we enter calendar year 2019 with considerable macroeconomic and political uncertainty, we will maintain focus on our disciplined, repeatable formula for stock selection which we believe has the potential to enable us to provide attractive long-term returns.
Sincerely,
Karina Funk, CFA
Portfolio Manager
David Powell, CFA
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund’s investment focus on environmental factors could cause it to make or avoid investments that could result in the Fund underperforming similar funds that do not have an environmental focus. Investments in smaller 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.
12
Brown Advisory Sustainable Growth Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 91.7% | ||||||||
Communication Services — 4.1% | ||||||||
29,580 | Alphabet, Inc. — Class A* | 30,909,917 | ||||||
Consumer Discretionary — 12.6% | ||||||||
21,446 | Amazon.com, Inc.* | 32,211,249 | ||||||
192,827 | Aptiv PLC | 11,872,358 | ||||||
84,489 | Home Depot, Inc. | 14,516,900 | ||||||
180,255 | Marriott International, Inc. | 19,568,483 | ||||||
357,737 | TJX Companies, Inc. | 16,005,153 | ||||||
94,174,143 | ||||||||
Consumer Staples — 2.4% | ||||||||
329,636 | Unilever NV ADR | 17,734,417 | ||||||
Health Care — 23.7% | ||||||||
324,275 | Danaher Corp. | 33,439,238 | ||||||
119,061 | Edwards Lifesciences Corp.* | 18,236,573 | ||||||
58,236 | IDEXX Laboratories, Inc.* | 10,833,061 | ||||||
46,404 | Illumina, Inc.* | 13,917,952 | ||||||
31,799 | Mettler-Toledo International, Inc.* | 17,984,878 | ||||||
135,145 | Thermo Fisher Scientific, Inc. | 30,244,100 | ||||||
122,943 | UnitedHealth Group, Inc. | 30,627,560 | ||||||
217,046 | West Pharmaceutical Services, Inc. | 21,277,019 | ||||||
176,560,381 | ||||||||
Industrials — 13.0% | ||||||||
361,620 | A.O. Smith Corp. | 15,441,174 | ||||||
275,652 | Fortive Corp. | 18,650,614 | ||||||
220,928 | J.B. Hunt Transport Services, Inc. | 20,555,141 | ||||||
148,641 | Nordson Corp. | 17,740,303 | ||||||
224,996 | Verisk Analytics, Inc.* | 24,533,564 | ||||||
96,920,796 | ||||||||
Information Technology — 29.7% | ||||||||
91,884 | Adobe, Inc.* | 20,787,836 | ||||||
157,146 | Aspen Technology, Inc.* | 12,914,258 | ||||||
146,423 | Autodesk, Inc.* | 18,831,462 | ||||||
142,725 | Intuit, Inc. | 28,095,416 | ||||||
1,225,181 | Marvell Technology Group, Ltd. | 19,835,681 | ||||||
363,838 | Microsoft Corp. | 36,955,026 | ||||||
157,885 | Monolithic Power Systems, Inc. | 18,354,131 | ||||||
133,851 | salesforce.com, Inc.* | 18,333,572 | ||||||
87,817 | Tyler Technologies, Inc.* | 16,318,155 | ||||||
237,013 | Visa, Inc. | 31,271,495 | ||||||
221,697,032 | ||||||||
Materials — 6.2% | ||||||||
434,277 | Ball Corp. | 19,968,056 | ||||||
175,633 | Ecolab, Inc. | 25,879,523 | ||||||
45,847,579 | ||||||||
Total Common Stocks (Cost $542,697,412) | 683,844,265 | |||||||
Real Estate Investment Trusts — 4.8% | ||||||||
225,735 | American Tower Corp. | 35,709,020 | ||||||
Total Real Estate Investment Trusts (Cost $26,095,480) | 35,709,020 | |||||||
Short-Term Investments — 2.5% | ||||||||
Money Market Funds — 2.5% | ||||||||
18,778,906 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 18,778,906 | |||||||
Total Short-Term Investments (Cost $18,778,906) | 18,778,906 | |||||||
Total Investments — 99.0% (Cost $587,571,798) | 738,332,191 | |||||||
Other Assets in Excess of Liabilities — 1.0% | 7,226,420 | |||||||
NET ASSETS — 100.0% | $ | 745,558,611 |
ADR — American Depositary Receipt
* | Non-Income Producing |
# | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Information Technology | 29.7% |
Health Care | 23.7% |
Industrials | 13.0% |
Consumer Discretionary | 12.6% |
Materials | 6.2% |
Real Estate Investment Trusts | 4.8% |
Communication Services | 4.1% |
Money Market Funds | 2.5% |
Consumer Staples | 2.4% |
Other Assets and Liabilities | 1.0% |
100.0% |
The accompanying notes are an integral part of these financial statements.
13
Brown Advisory Mid-Cap Growth Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Mid-Cap Growth Fund – Investor Shares (the “Fund”) decreased 11.07% in value. During the same period, the Russell Midcap® Growth Index (the “Index”), the Fund’s benchmark, decreased 9.63%.
Given our approach and historical results, we generally expect to outperform in down markets. While our benchmark’s decline likely provided a tailwind to the Fund’s relative results, we believe that other market dynamics provided an opposing headwind during the final six months of 2018. Nonetheless, stock-selection typically drives our results and while we were happy with the Fund’s positive stock selection and relative performance for the full calendar year, both were better in the first half.
Two portfolio dynamics likely worked against the Fund’s relative returns in the last six months—its small-cap tilt and its overweight to health care. Large-cap stocks generally held-up better than small-caps in the back half of 2018. Specifically, the Russell 1000® Growth Index outpaced the Russell 2000® Growth Index by more than 9% from the end of June through December 2018. We believe that this provided a headwind in the last six months since the Fund’s holdings have a lower weighted-average market cap than its benchmark. Moreover, the technology sector within the Fund’s benchmark outpaced health care by approximately 5%. Through the last six months, due entirely to our bottom-up stock selection process and a change to our benchmark’s sector weights in June, the Fund was overweight health care and underweight tech. This was likely the wrong sector tilt over this short period.
Regardless of market dynamics, stock selection drove our relative shortfall in the last six months. A few holdings reported disappointing results late in the year and their share prices were hit disproportionately in a skittish market. The drag from these detractors more than offset the contribution from our gainers during the last six months.
Top detractors during the period included Electronic Arts (EA), Welbilt and Catalent. In September, video game maker Electronic Arts announced slower-than-expected growth in its main franchise—FIFA Ultimate Team—and its managers lowered full-year guidance. To make matters worse, EA’s “Live Services” revenue growth (largely tied to FIFA Ultimate Team) decelerated two quarters in a row and, as of December, game sales of another main franchise, Battlefield V, seemed soft. We view these issues as short-term and added to the position on weakness. EA benefits from three long-term trends that could drive above-average returns for shareholders in the coming years: a shift to full-game downloads, new monetization schemes and ultimately a transition to subscription. The third trend is embryonic. Nonetheless, a shift to subscription could not only lift revenue, but also its predictability, potentially driving EA’s valuation higher.
Despite carrying a leverage ratio over 4x net-debt/EBITDA, we expected Welbilt’s commercial kitchen-equipment business to hold up better in a pullback. However, a series of company-specific events halted the firm’s operating momentum from earlier in the year and caused investors to line up for the exits during the fourth quarter. Despite solid organic growth in North America (a linchpin of our investment thesis), Welbilt missed Q3 earnings on lower-than-expected margins. Shares felt additional pressure due to a recent management change and tariff fears. Based on our field research, we do not believe that end-market demand for the company’s products or its competitive position have changed. We also believe that some of the recent gross margin pressures will prove transient.
Catalent, 2017’s largest contributor, took a pause in 2018 as growth decelerated. Nonetheless, we still believe that it is a leading pharmaceutical dosage form maker with bright prospects in its burgeoning biologics manufacturing business. A prolonged global shortage of ibuprofen—the active ingredient in the company’s largest product—has temporarily hampered growth. Moreover, we believe that a large customer’s decision to manufacture one drug in-house is a rare event that fueled further negative sentiment. To us, the current setup looks like our original entry point two years ago and we were excited to add to the position on weakness. Catalent’s business can be volatile quarter-to-quarter, but it still benefits from secular trends towards outsourcing and large-molecule therapies and we think this will shine through with steadier results later this year.
The top performers during the period included Ball Corp, Church & Dwight, and Dexcom. The first two benefited from a rotation into the consumer staples sector, as well as company-specific success.
Ball Corp makes about 1/3 of the world’s aluminum beverage cans. Its stock price stalled in 2017 while management struggled to convince investors that it could successfully integrate a large acquisition. Sentiment turned positive in 2018 as Ball posted solid results. Longer-term, the company may benefit from a shift towards higher-priced “specialty” cans and operating efficiency gains under an accomplished management team. In the future, we believe that Ball has the potential to also reap the benefits of a global shift away from plastic water bottles (aluminum cans can be recycled more efficiently).
14
Brown Advisory Mid-Cap Growth Fund
A Message to Our Shareholders
December 31, 2018
With “power brands” such as Arm & Hammer, prospects for domestic share gains, faster growth overseas, and a strong management team, we believe that Church & Dwight remains fairly unique amongst consumer staples companies in its ability to raise prices and push 5% organic growth. The company’s organic growth accelerated through 2018 and its share price responded favorably. We trimmed the position on valuation, but would consider rebuilding it should a buying opportunity present itself.
Dexcom’s stock price more than doubled during 2018. It was hit disproportionately in late 2017 when a competing glucose monitor from Abbott Labs (dubbed the “FreeStyle Libre”) won FDA approval with a favorable label; however, fears of heightened competition and share losses proved overdone. Dexcom’s growth actually accelerated as Abbott’s marketing raised awareness and Dexcom introduced its newest sensor.
During the period, the Fund added 10 investments and exited 12 positions. We took advantage of the market drawdown in the second half to build new positions in well-run companies that we believe will be much larger in three to five years. Four of the new positions were in health care, four in technology, one in consumer discretionary and one in financials. While in disparate parts of the market, there is a common thread—all of the new positions fit our “3G” philosophy, which focusses on durable growth, sound governance, and scalable go-to-market strategies. We highlight two below, though we are just as excited about the others.
We built a position in Black Knight Inc, a software provider to the mortgage industry. We think Black Knight’s announced new-business wins have the potential to drive single-digit revenue growth over the next three years in a stable market that is less prone, historically, to cyclical swings (servicing existing home mortgages). Moreover, we believe that the firm has the potential to leverage its dominant position (70% market share) in first-lien mortgage servicing software to grow in the adjacent second-lien (HELOCs) space, where software adoption is low. The company also hopes to cross-sell data analytics products and cultivate a small loan origination software business that could be much bigger someday.
We bought shares of Autodesk, which offers 3D design, engineering and entertainment software solutions. Autodesk is transitioning from a perpetual software licensing model to subscription. Through various initiatives, including new products, subscription bundles and piracy control, we believe that Autodesk has the potential to, over the next three years, push more durable revenue and free cash flow growth beyond current expectations.
We sold positions across a variety of sectors—five in information technology, four in health care, one in consumer discretionary, one in financials, and one in consumer staples. We sold shares of Alder Biopharmaceuticals, BankUnited, Blackbaud, Cambrex Corp, Microchip Technologies and Ultragenyx due to fundamental concerns. We exited positions in Global Payments and Gartner due to valuation. Cotiviti was acquired by a private equity-funded competitor. Finally, we sold Estee Lauder and CoreLogic to fund other opportunities.
Shifting the lens slightly from the six-month calendar period, since peaking in mid-September, our benchmark retrenched approximately 22% through Christmas Eve, its recent low. While similar in magnitude to its last pullback (-20% from June 23, 2015 through February 11, 2016), this drawdown was more broad. Biotech, energy, and tangential cyclicals were hit hard in late 2015, while almost every sector was down 20% - 25% this time around.
We have some difficulty seeing how the market could enjoy the same buoyancy it did in 2016/2017 in the next 12 months. There is less slack in the economy now versus mid-2015 (when unemployment was over 5%), monetary policy is less supportive, interest rates are higher, trade ties are weaker, growth in China is slower, the election and tax-reform are in the rearview mirror, and certain industries are showing cracks, such as building materials and semiconductors.
That said, we have yet to see small businesses “turtle.” For instance, Cintas (which rents uniforms to roughly one million customers) noted no signs of slowing demand for its services on its December 20, 2018 earnings call. Also, the U.S. consumer remains optimistic and valuations seem reasonable (the Russell Midcap Growth Index trades near its historical average forward price-to-earnings ratio).
Regardless of which way the market turns in 2019, we do not believe that the portfolio expresses a major bet for or against the domestic economic cycle and we are comfortable with the positioning of the Fund relative to the Russell Midcap Growth Index due to our philosophy, approach and valuation sensitivity.
15
Brown Advisory Mid-Cap Growth Fund
A Message to Our Shareholders
December 31, 2018
As always, we remain committed to seeking attractive risk-adjusted returns over a full market cycle by owning a diversified portfolio of companies, each of which we believe could one day grow much larger. We thank you for your support and interest, and look forward to updating you in more detail in our next letter.
Sincerely,
George Sakellaris
Portfolio Manager
Diversification does not assure a profit or protect against loss in a declining market.
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The 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.
16
Brown Advisory Mid-Cap Growth Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 92.9% | ||||||||
Communication Services — 5.5% | ||||||||
7,392 | Cogent Communications Holdings, Inc. | 334,192 | ||||||
7,732 | Electronic Arts, Inc.* | 610,132 | ||||||
4,100 | Liberty Broadband Corp.* | 294,421 | ||||||
6,326 | Liberty SiriusXM* | 232,797 | ||||||
1,471,542 | ||||||||
Consumer Discretionary — 14.0% | ||||||||
7,000 | Aptiv PLC | 430,990 | ||||||
3,939 | Bright Horizons Family Solutions, Inc.* | 439,002 | ||||||
5,609 | CarMax, Inc.* | 351,853 | ||||||
10,236 | Ctrip.com International, Ltd. ADR* | 276,986 | ||||||
6,707 | Etsy, Inc.* | 319,052 | ||||||
5,565 | Marriott International, Inc. | 604,136 | ||||||
13,516 | National Vision Holdings, Inc.* | 380,746 | ||||||
5,755 | Ross Stores, Inc. | 478,815 | ||||||
7,849 | Six Flags Entertainment Corp. | 436,640 | ||||||
3,718,220 | ||||||||
Consumer Staples — 2.0% | ||||||||
4,144 | Brown-Forman Corp. | 197,171 | ||||||
2,460 | Calavo Growers, Inc. | 179,482 | ||||||
2,504 | Church & Dwight Co., Inc. | 164,663 | ||||||
541,316 | ||||||||
Financials — 2.4% | ||||||||
14,424 | KKR & Co, Inc. | 283,143 | ||||||
7,088 | Webster Financial Corp. | 349,368 | ||||||
632,511 | ||||||||
Health Care — 17.2% | ||||||||
1,992 | Agios Pharmaceuticals, Inc.* | 91,851 | ||||||
2,299 | Biohaven Pharmaceutical Holding Co., Ltd.* | 85,017 | ||||||
23,855 | Catalent, Inc.* | 743,799 | ||||||
3,939 | Charles River Laboratories International, Inc.* | 445,816 | ||||||
2,548 | Cooper Companies, Inc. | 648,466 | ||||||
2,402 | DexCom, Inc.* | 287,760 | ||||||
4,657 | Edwards Lifesciences Corp.* | 713,312 | ||||||
1,084 | Global Blood Therapeutics, Inc.* | 44,498 | ||||||
4,335 | Henry Schein, Inc.* | 340,384 | ||||||
5,550 | Integra LifeSciences Holdings Corp.* | 250,305 | ||||||
952 | Loxo Oncology, Inc.* | 133,347 | ||||||
1,992 | Neurocrine Biosciences, Inc.* | 142,249 | ||||||
2,446 | Teleflex, Inc. | 632,242 | ||||||
4,559,046 | ||||||||
Industrials — 20.6% | ||||||||
6,648 | Allegion PLC | 529,912 | ||||||
6,853 | BWX Technologies, Inc. | 261,990 | ||||||
2,255 | Cintas Corp. | 378,817 | ||||||
5,052 | HEICO Corp. | 391,430 | ||||||
4,613 | Hexcel Corp. | 264,509 | ||||||
2,416 | IDEX Corp. | 305,044 | ||||||
2,651 | J.B. Hunt Transport Services, Inc. | 246,649 | ||||||
5,931 | Sensata Technologies Holding PLC* | 265,946 | ||||||
6,883 | SiteOne Landscape Supply, Inc.* | 380,423 | ||||||
10,837 | TransUnion | 615,542 | ||||||
13,633 | Waste Connections, Inc. | 1,012,250 | ||||||
35,043 | Welbilt, Inc.* | 389,328 | ||||||
5,682 | Woodward, Inc. | 422,116 | ||||||
5,463,956 | ||||||||
Information Technology — 26.6% | ||||||||
3,910 | Amphenol Corp. | 316,788 | ||||||
3,163 | Aspen Technology, Inc.* | 259,935 | ||||||
4,247 | Autodesk, Inc.* | 546,207 | ||||||
10,280 | Black Knight, Inc.* | 463,217 | ||||||
6,985 | Booz Allen Hamilton Holding Corp. | 314,814 | ||||||
3,602 | Broadridge Financial Solutions, Inc. | 346,693 | ||||||
1,274 | Fair Isaac Corp.* | 238,238 | ||||||
23,093 | Genpact, Ltd. | 623,280 | ||||||
7,439 | GoDaddy, Inc.* | 488,147 | ||||||
4,159 | Guidewire Software, Inc.* | 333,677 | ||||||
2,504 | Intuit, Inc. | 492,912 | ||||||
2,241 | Jack Henry & Associates, Inc. | 283,531 | ||||||
24,133 | Marvell Technology Group, Ltd. | 390,714 | ||||||
19,462 | Mimecast, Ltd.* | 654,507 | ||||||
4,701 | NXP Semiconductors NV | 344,489 | ||||||
1,874 | ServiceNow, Inc.* | 333,666 | ||||||
1,406 | WEX, Inc.* | 196,924 | ||||||
5,682 | Worldpay, Inc.* | 434,275 | ||||||
7,062,014 | ||||||||
Materials — 4.6% | ||||||||
16,884 | Ball Corp. | 776,326 | ||||||
3,090 | Ecolab, Inc. | 455,312 | ||||||
1,231,638 | ||||||||
Total Common Stocks (Cost $26,379,029) | 24,680,243 | |||||||
Real Estate Investment Trusts — 2.1% | ||||||||
3,368 | SBA Communications Corp.* | 545,246 | ||||||
Total Real Estate Investment Trusts (Cost $540,028) | 545,246 | |||||||
Total Investments — 95.0% (Cost $26,919,057) | 25,225,489 | |||||||
Other Assets in Excess of Liabilities — 5.0% | 1,314,891 | |||||||
NET ASSETS — 100.0% | $ | 26,540,380 |
ADR — American Depositary Receipt
* | Non-Income Producing |
PORTFOLIO HOLDINGS
% of Net Assets
Information Technology | 26.6% |
Industrials | 20.6% |
Health Care | 17.2% |
Consumer Discretionary | 14.0% |
Communication Services | 5.5% |
Materials | 4.6% |
Financials | 2.4% |
Real Estate Investment Trusts | 2.1% |
Consumer Staples | 2.0% |
Other Assets and Liabilities | 5.0% |
100.0% |
The accompanying notes are an integral part of these financial statements.
17
Brown Advisory Small-Cap Growth Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Small-Cap Growth Fund – Investor Shares (the “Fund”) decreased 12.69% in value. During the same period, the Russell 2000® Growth Index (the “Index”), the Fund’s benchmark, decreased 17.33%.
Our strategy seeks to produce attractive risk-adjusted returns over a full market cycle through long-term security selection. Stock-specific performance has driven our ability to keep pace in “risk-on” markets, while portfolio diversification, asset quality and valuation sensitivity have helped to produce solid downside capture over time. Simply put, we try to take risks when we are getting paid to do so and to avoid them when we are not. We want to think like owners of a business versus renters of stock, but acknowledge that, when our thesis is violated, it is usually time to part ways with a holding. We believe that this approach is an effective one for driving sound long-term results.
Economy
The U.S. economy continued to outshine other developed nations and many emerging markets in 2018. A combination of highly stimulative tax cuts, relatively low (but rising) interest rates, historically low unemployment, rising wages, and rising asset prices (at least for most of the year) helped drive accelerating economic growth on the backs of strong consumer spending. This backdrop produced a strong greenback relative to other currencies and attracted capital from around the world.
This capital concentration reached extreme levels around the middle of the year. Emerging markets entered a bear market as the carrying cost of dollar-denominated debt continued rising and the U.S. Federal Reserve moved from an accommodative policy – low rates and quantitative easing – that drove ample liquidity to a regime of tighter conditions. Eventually, other central banks around the world joined the Fed in an attempt to normalize policy following the Great Financial Crisis of 2008. World economies were further impacted by U.S.-China trade relations, “Brexit” and persistent European political upheaval. With a relatively insulated position, the U.S. appeared to once again be the shining city on the global economic hill. Then, the lights went out.
The U.S. equity market had reached such extreme outlier status that one of two things had to happen – either foreign markets play catch-up to the U.S. on the backs of improving economic conditions or the U.S. tanks. The latter happened, as for all intents and purposes a bear market arrived with small-caps hit particularly hard. Many have tried to point to a specific cause: rates have risen too much; a deterioration in U.S-Chinese relations is hurting confidence and growth; President Trump is simply too volatile; the populist movement appears poised to destroy the European Union. If the U.S. market descended like an avalanche, then think all of these factors amounting to a blizzard. But, an avalanche does not begin because of that last fateful snow flake. It occurs because the snow on the ground is fundamentally unstable to begin with.
Let’s review the condition of the U.S. market in August of 2018. It possessed the following traits: record-high valuations, record-low volatility, record-long economic expansion, record-long bull market, record-low interest rates, massive amounts of liquidity, historically low credit spreads, high leverage, etc. There is no short-term predictive value in these attributes; however, it is likely that equity values were stacked up fairly high.
As bottom-up investors, we spend very little time attempting to predict what the global macro has in store next. However, we do ask ourselves whether it is the time to take a little more risk or be a little more cautious in our affairs. Choosing the latter certainly helped at the tail end of 2018 given the way the economy and market unfolded.
Strategy
Nearly all of the decision making within the strategy is informed by our company-specific conversations and due diligence. We attempt to stack up data points, conduct a thorough analysis and invest in a business when we believe that the future is going to be better than what the market presently expects.
We keep a steady pipeline of new investments under consideration for inclusion in the portfolio. When one company appears vastly superior in its risk/reward dynamics and/or has characteristics that make it a highly probable long-term compounder, our decision process is quite easy. However, there are times when several businesses appear roughly equivalent in their attributes. What then? It is at this point that we look critically at the portfolio to determine where we have potential over or under-exposures to various market sub-sectors or factors. It is at this point where we also think about the overall investment landscape in the hope of tilting the investment odds in our favor with each incremental decision. Here is what we see today.
For much of 2018, the market remained in a state of relatively low volatility and high valuation. The downdraft and violent price movements of the fourth quarter took us from extreme levels to somewhere closer to normal. For the entire year, small-cap
18
Brown Advisory Small-Cap Growth Fund
A Message to Our Shareholders
December 31, 2018
volatility was about average. Absolute valuations moved from the 99th percentile to something simply above average. Investors started to contemplate risks, not just potential gains.
We believe that volatility is the enemy of the short-term investor and the friend of the long-term investor. Given recent price movements, portfolio activity has been much higher than average as we shift the portfolio in light of a changing opportunity set. We feel as though we enter 2019 with a constructive balance of legacy and new holdings, offense and defense, and growth at reasonable values.
In deploying capital, we are cognizant of the following potential risks. Leverage across the small-cap space remains quite elevated and close to historical highs. Thus, we have been paring back or capping the weighting of more highly levered businesses. Portfolio leverage remains quite low on an absolute and relative basis, but we will remain cautious, particularly when high yield spreads remain relatively tight given recent market and economic concerns. Valuation and quality also did not help much in protecting capital in 2018, but we believe that if recent volatility continues, these two attributes have the potential to be beneficial and are acting accordingly. Finally, in a market where cyclical sectors were hit tremendously hard, information technology had a banner year, producing positive returns in the growth space. We believe that this is due to investors being largely more concerned to date about U.S.-China trade relations than true economic weakness. However, recent economic data coming out of China, Europe and the U.S. bears monitoring as investors may start to look not only at tech’s secular growth attributes, but its cyclicality as well.
The last risk worth noting is the rise of the machines. Clearly, trading in the U.S. market is more influenced than ever by index funds, ETFs and algorithms than at any period in our lives. We likely saw some influence of fund flows moving out of ETFs and automated de-risking in the fourth quarter, but for the full year small-cap ETF fund flows were demonstrably positive. Individual stock dislocations, particularly in less liquid names, is certainly very possible should fund flows actually turn negative in 2019.
With all of the above, it is impossible to predict, but we will do our best to prepare.
Sector Contribution
During the second half of 2018, the portfolio saw a positive contribution across most sectors. We were pleased to see this balanced performance as it indicates that the strategy is not relying on a single source to generate its relative performance. Furthermore, we saw a sizeable contribution from stock selection during the year, which was complemented by general sector allocations.
Specifically, sector strength was seen in consumer discretionary, energy, industrials, information technology and health care. The only area of weakness was in the financial services sector where the average stock underperformed the constituents of the benchmark. Worth noting is that our positioning in financials tends to lean toward data and processing, analytics, and asset management businesses, which differs somewhat from our primary indices.
Our team will continue striving for balance across the portfolio as we progress into 2019 similar to what we achieved in 2018.
Security Contribution
Similar to our view on sector contribution, we greatly value diversification in our individual stock contribution. Our goal is finding outperforming securities across sectors vs. placing an over reliance on a sub-sector or theme to power returns. Given the companies comprising our top five, we believe that we achieved this outcome recently.
The positive contributors over the six-month period were more stable businesses given the market climate. ESCO Technologies, a diversified industrial business, benefited from a solid calendar 3Q18 earnings report and less cyclical end markets than the average industrial company, highlighted by its aerospace and defense exposure coupled with its segment focused on services utilities. This limited the impact of economic concerns on the stock on a relative basis. EVO Payments, a merchant-acquiring company with high exposure to fast growth international markets, outperformed the broader index in the fourth quarter following a strong quarterly earnings release, which showed robust growth in both the North American and European markets. Additionally, management issued revised guidance that called for an acceleration in currency-neutral revenue growth relative to their prior guide. Casey’s General Store, a Midwest operator of convenience stores, demonstrated traction on their multi-year growth and efficiency plan. Investor optimism increased as gasoline prices dropped, which has tended to help stock traffic growth and thus sales. Bright Horizons Family Solutions, a leading provider of early childhood care and education, rose steadily throughout 2018 as the company reported solid quarterly results driven by relatively predictable revenue growth. The position has remained sizeable due to its robust business model and low cyclicality. Mercury Systems is a provider of commercial, off-the-shelf technologies for defense companies. Their sub-systems have continued to represent more of the bill of materials within numerous military
19
Brown Advisory Small-Cap Growth Fund
A Message to Our Shareholders
December 31, 2018
programs, thus driving outsized organic growth and validating the company’s acquisition strategy. The stock has remained a small position due to its historical volatility and valuation.
The bottom five contributors for the period were not as diverse as the top five contributors. While their end markets differ dramatically, most were “industrial” companies. Welbilt, a manufacturer of commercial kitchen equipment and systems, was our most disappointing stock of 2018. While North American revenue growth was solid and consistent with our due diligence, the company’s margins were negatively impacted by a collection of surprising issues in 3Q18. This result ran counter to the last several quarters, which were highlighted by inconsistent revenue growth, but strong margins. Shares felt additional pressure due to a recent management change and tariff fears.
Catalent, a contract drug manufacturer, reported a disappointing fiscal 1Q19 where topline growth was pressured by the persistent global shortage of ingredients for ibuprofen, coupled with a decision by a customer to move its product’s manufacturing in-house. Despite these pressures, management reiterated its fiscal year revenue and profitability guidance. The counterbalance to these headwinds was the launch of new products that contributed ~$50M in the most recent quarter and the likely abatement of the ibuprofen issue in fiscal 2H19. We had anticipated that this position would have added to relative performance given its profile rather than detract. Our confidence in the long-term outlook remains.
TopBuild Corporation, a leading provider of residential and commercial insulation products and services, declined along with the entire housing complex despite reporting solid results. While the rise in interest rates may slow housing demand, we believe the long-term backdrop for housing is stable to positive and TopBuild should be a consolidator in highly fragmented industry.
We bought shares of BWX Technologies, a monopoly supplier of nuclear propulsion systems to the U.S. government, for its relatively low cyclicality and strong long-term visibility. Despite an elevated valuation, we thought the stock would act more defensively (as it is a defense company) and thus it ranked as our second most disappointing last year. Simply put, two non-core and relatively minor business segments produced a large decline in the stock as management failed to execute on the positive vision they had previously touted. A meaningful portion of the down draft relates to management credibility issues.
Finally, BankUnited, a regional bank operating primarily in New York and Florida, came under pressure with the broader bank complex as economic concerns materialized and a flattening yield curve threatened to pressure margins.
In addition to what worked and what did not work during the prior six months, it is important to note that the team’s high level of productivity and the market’s volatility led to more overall activity in the portfolio than is typical. In fact, there were 16 additions to the Fund last year, including Biohaven Pharmaceutical, Chegg and Integra Life Sciences. Portfolio deletions included Cotiviti and Cavium, which were acquired, along with the elimination of positions such as Alarm.com where we believed that valuation and expectations embedded in the stock were too lofty, yielding a poor risk/reward dynamic. If volatility reigns in 2019, we believe we should be well prepared to take advantage of a changing opportunity set due to the breadth and depth of our analysts’ research.
Conclusion
Equity markets have re-based. There is now a greater appreciation of risk as fear of missing out (FOMO) has been replaced with a more cautious approach. If the economic environment slows benignly and the Federal Reserve leans dovish, we believe that the conditions for positive equity returns exist for 2019. However, what is not priced in yet is a more materially slowdown in the U.S. economy. All one has to do is look broadly across earnings estimates to see that a down cycle is not yet built into stock prices. Eventually, last year, the U.S. market tumbled to a position more in line with global markets. The key today is whether our economy does the same in 2019.
While we certainly bought risk selectively in 4Q18 (such as Chegg, 2U, MakeMyTrip) and it appears to already be showing up in the portfolio’s upside capture, we remain focused on relative downside risk against illiquidity, leverage, and unappreciated cyclicality. As we enter 2019, our industrial and information technology weights are down and we are selectively adding to consumer discretionary/staples and healthcare as valuations have compressed.
As we look ahead, we know that people and process drive long-term outcomes. In this regard, we are pleased to report that our team has never been stronger, our process more sound, or our productivity higher. 2018 was a banner year for company interviews, building our pipeline and new investment activity. These are the leading indicators that we monitor to determine whether our probability of outperforming is improving or not. Overall, we believe that we are in good form and I would like to thank the team for their dedication and hard work.
20
Brown Advisory Small-Cap Growth Fund
A Message to Our Shareholders
December 31, 2018
We remain focused on attempting to generate attractive risk-adjusted returns over a full market cycle. In order to do so, we need a strong team and process, but we also need patient, thoughtful and well-informed investors to enable us to continue to take a long-term, high active share approach. We greatly appreciate your support and interest in the Fund. Our philosophy is to attempt to harness the power of compounding, drive returns through stock selection and seeking to mitigate downside risk through diversification, quality and valuation sensitivity. We look forward to the year ahead and updating you on our progress.
Sincerely,
Christopher A. Berrier
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in smaller companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The value of the Fund’s investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. 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.
21
Brown Advisory Small-Cap Growth Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 96.8% | ||||||||
Communication Services — 4.7% | ||||||||
303,184 | Cogent Communications Holdings, Inc. | 13,706,949 | ||||||
379,628 | GCI Liberty, Inc.* | 15,625,488 | ||||||
1,833,206 | Zynga, Inc.* | 7,204,500 | ||||||
36,536,937 | ||||||||
Consumer Discretionary — 19.2% | ||||||||
287,574 | Bright Horizons Family Solutions, Inc.* | 32,050,122 | ||||||
613,210 | Carrols Restaurant Group, Inc.* | 6,033,986 | ||||||
467,161 | Chegg, Inc.* | 13,276,716 | ||||||
237,654 | Choice Hotels International, Inc. | 17,011,273 | ||||||
432,468 | Clarus Corp. | 4,376,576 | ||||||
188,525 | Core-Mark Holding Co., Inc. | 4,383,206 | ||||||
361,433 | Despegar.com Corp.* | 4,485,384 | ||||||
270,580 | Etsy, Inc.* | 12,871,491 | ||||||
287,917 | Habit Restaurants, Inc.* | 3,023,129 | ||||||
435,302 | Hudson, Ltd.* | 7,465,429 | ||||||
503,037 | Lindblad Expeditions Holdings, Inc.* | 6,770,878 | ||||||
547,733 | MakeMyTrip, Ltd.* | 13,326,344 | ||||||
398,764 | National Vision Holdings, Inc.* | 11,233,182 | ||||||
304,034 | TopBuild Corp.* | 13,681,530 | ||||||
149,989,246 | ||||||||
Consumer Staples — 3.0% | ||||||||
74,525 | Calavo Growers, Inc. | 5,437,344 | ||||||
93,827 | Casey’s General Stores, Inc. | 12,022,992 | ||||||
252,360 | Hain Celestial Group, Inc.* | 4,002,429 | ||||||
38,091 | PriceSmart, Inc. | 2,251,178 | ||||||
23,713,943 | ||||||||
Energy — 0.8% | ||||||||
229,445 | Cactus, Inc.* | 6,289,087 | ||||||
Financials — 6.0% | ||||||||
470,970 | Ares Management Corp. | 8,373,846 | ||||||
206,846 | BankUnited, Inc. | 6,192,969 | ||||||
259,780 | ConnectOne Bancorp, Inc. | 4,798,137 | ||||||
176,688 | Hamilton Lane, Inc. | 6,537,456 | ||||||
135,502 | Prosperity Bancshares, Inc. | 8,441,775 | ||||||
256,590 | Webster Financial Corp. | 12,647,321 | ||||||
46,991,504 | ||||||||
Health Care — 14.9% | ||||||||
88,646 | Acceleron Pharma, Inc.* | 3,860,533 | ||||||
89,844 | Agios Pharmaceuticals, Inc.* | 4,142,707 | ||||||
206,859 | Alder Biopharmaceuticals, Inc.* | 2,120,305 | ||||||
31,871 | AnaptysBio, Inc.* | 2,033,051 | ||||||
120,473 | Biohaven Pharmaceutical Holding Co., Ltd.* | 4,455,092 | ||||||
756,484 | Catalent, Inc.* | 23,587,171 | ||||||
213,266 | Charles River Laboratories International, Inc.* | 24,137,446 | ||||||
191,779 | Coherus BioSciences, Inc.* | 1,735,600 | ||||||
87,030 | Global Blood Therapeutics, Inc.* | 3,572,582 | ||||||
60,372 | HealthEquity, Inc.* | 3,601,190 | ||||||
122,343 | Henry Schein, Inc.* | 9,606,372 | ||||||
267,568 | Integra LifeSciences Holdings Corp.* | 12,067,317 | ||||||
57,591 | Loxo Oncology, Inc.* | 8,066,771 | ||||||
663,317 | NeoGenomics, Inc.* | 8,364,427 | ||||||
74,876 | Neurocrine Biosciences, Inc.* | 5,346,895 | ||||||
116,697,459 | ||||||||
Industrials — 20.2% | ||||||||
316,883 | BWX Technologies, Inc. | 12,114,437 | ||||||
184,728 | ESCO Technologies, Inc. | 12,182,812 | ||||||
213,760 | Healthcare Services Group, Inc. | 8,588,877 | ||||||
159,332 | HEICO Corp. | 12,345,043 | ||||||
211,486 | Hexcel Corp. | 12,126,607 | ||||||
85,319 | IDEX Corp. | 10,772,377 | ||||||
102,408 | John Bean Technologies Corp. | 7,353,919 | ||||||
345,245 | Knight-Swift Transportation Holdings, Inc. | 8,655,292 | ||||||
113,580 | Mercury Systems, Inc.* | 5,371,198 | ||||||
202,605 | SiteOne Landscape Supply, Inc.* | 11,197,978 | ||||||
492,138 | Waste Connections, Inc. | 36,541,247 | ||||||
899,680 | Welbilt, Inc.* | 9,995,445 | ||||||
142,176 | Woodward, Inc. | 10,562,255 | ||||||
157,807,487 | ||||||||
Information Technology — 28.0% | ||||||||
166,968 | 2U, Inc.* | 8,301,649 | ||||||
48,569 | AppFolio, Inc.* | 2,876,256 | ||||||
173,908 | Aspen Technology, Inc.* | 14,291,760 | ||||||
124,147 | Blackbaud, Inc. | 7,808,846 | ||||||
301,356 | BlackLine, Inc.* | 12,340,528 | ||||||
61,304 | Broadridge Financial Solutions, Inc. | 5,900,510 | ||||||
142,629 | CoreLogic, Inc.* | 4,766,661 | ||||||
34,075 | Coupa Software, Inc.* | 2,141,955 | ||||||
40,649 | Envestnet, Inc.* | 1,999,524 | ||||||
114,664 | Everbridge, Inc.* | 6,508,329 | ||||||
698,569 | EVO Payments, Inc.* | 17,233,697 | ||||||
56,478 | Fair Isaac Corp.* | 10,561,386 | ||||||
912,370 | Genpact, Ltd. | 24,624,866 | ||||||
123,995 | Guidewire Software, Inc.* | 9,948,119 | ||||||
58,030 | Littelfuse, Inc. | 9,950,984 | ||||||
323,283 | Marvell Technology Group, Ltd. | 5,233,952 | ||||||
50,259 | MAXIMUS, Inc. | 3,271,358 | ||||||
704,927 | Mimecast, Ltd.* | 23,706,695 | ||||||
151,641 | Paylocity Holding Corp.* | 9,130,305 | ||||||
42,701 | Ultimate Software Group, Inc.* | 10,456,194 | ||||||
75,068 | WEX, Inc.* | 10,514,024 | ||||||
308,202 | Workiva, Inc.* | 11,061,370 | ||||||
363,017 | Zuora, Inc.* | 6,585,128 | ||||||
219,214,096 | ||||||||
Total Common Stocks (Cost $677,770,478) | 757,239,759 | |||||||
Private Placements — 0.3% | ||||||||
19,200 | Greenspring Global Partners IV-B, L.P.*^† | 2,453,767 | ||||||
91,769 | Greenspring Global Partners V-B, L.P.*~† | 115,947 | ||||||
Total Private Placements (Cost $6,069) | 2,569,714 |
The accompanying notes are an integral part of these financial statements.
22
Brown Advisory Small-Cap Growth Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Short-Term Investments — 2.8% | ||||||||
Money Market Funds — 2.8% | ||||||||
21,404,500 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 21,404,500 | |||||||
Total Short-Term Investments (Cost $21,404,500) | 21,404,500 | |||||||
Total Investments — 99.9% (Cost $699,181,047) | 781,213,973 | |||||||
Other Assets in Excess of Liabilities — 0.1% | 900,125 | |||||||
NET ASSETS — 100.0% | $ | 782,114,098 |
* | Non-Income Producing |
^ | Security is exempt from registration under Regulation D of the Securities Act of 1933. Security was acquired from February 2008 to April 2018 as part of a $2,000,000 capital commitment. At December 31, 2018 $1,920,000 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 was acquired from October 2012 to August 2018 as part of a $100,000 capital commitment. At December 31, 2018 $91,000 of the capital commitment has been fulfilled by the Fund. |
† | These securities are being fair valued, using significant unobservable inputs (Level 3), under the supervision of the Board of Trustees. Further, they may not be sold by the Fund and are considered illiquid. At December 31, 2018 the total market value of securities considered illiquid was $2,569,714 or 0.3% of net assets. Total unfunded capital commitments related to these holdings are immaterial and total $89,000, which is less than 0.1% of the Fund’s net assets as of the date of this report. |
# | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Information Technology | 28.0% |
Industrials | 20.2% |
Consumer Discretionary | 19.2% |
Health Care | 14.9% |
Financials | 6.0% |
Communication Services | 4.7% |
Consumer Staples | 3.0% |
Money Market Funds | 2.8% |
Energy | 0.8% |
Private Placements | 0.3% |
Other Assets and Liabilities | 0.1% |
100.0% |
The accompanying notes are an integral part of these financial statements.
23
Brown Advisory Small-Cap Fundamental Value Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Small-Cap Fundamental Value Fund – Investor Shares (the “Fund”) decreased 15.31% in value. During the same period, the Russell 2000® Value Index (the “Index”), the Fund’s benchmark, decreased 17.36%.
After seeing a meaningful rise over the prior two years, 2018 marks the worst year for small-cap shares since 2008. Investors have been focused on a number of current issues in the market today. While the economy is not in a recession, incremental news has been negative and has been pointing to a marked slowdown in economic growth from levels seen over the last eight quarters.
From an individual stock perspective, ATN International was the Fund’s largest contributor to performance during the six-month period. ATN International rose during the fourth quarter as the company’s international operations continued improving following hurricane damage in Fall 2017 and the subsequent network rebuild. Due to valuation, we exited our investment during the fourth quarter. Forest City Realty Trust was another top performer due to previously announcing acquisition of Forest City by Brookfield. Lastly, Nexstar Media Group performed well during the past six months. Nexstar’s rumored potential acquisition of Tribune Media was finally announced.
The largest detractor from performance was MRC Global, which sold off during the fourth quarter with the rest of the energy space as oil prices fell 38%. While MRC’s upstream segment (30% of revenues) will likely be affected by the fall in oil prices in 2019, we believe that the outlook for its midstream and downstream segments should remain favorable. We believe that free cash flow has the potential to accelerate in 2019 and the board initiated a new $150m share repurchase program (over 10% of the current market cap) to take advantage of the recent stock weakness.
Spectrum Brands was another detractor to performance, as the company’s fourth quarter results were below expectations, marking a step backwards after the prior quarter’s improvement. The fundamental disappointment was driven by weak performance in the company’s home and garden business, which suffered from unfavorable weather, and from execution mistakes in the company’s European pet care business. Further, the company determined that the previously envisioned sale of its appliance business was no longer possible at attractive prices, so that segment was reconsolidated. Instead the company reached an agreement to sell its auto care business to Energizer (alongside the sale of its battery business). This change in near-term disposition strategy due to regulatory concerns was poorly received. Looking forward, the company recently closed the sale of the battery business for $2 billion and the sale of its auto care business is expected to close in February. Upon completion, Spectrum Brands’ leverage is expected to fall materially, at which point we believe the company may begin repurchasing stock. We also believe that execution issues will prove temporary, and that with the increased focus on fewer business lines will be fully resolved in the near term.
The Fund added 14 names during the six month period, including Essential Properties Realty Trust, Hudson Group and Eagle Materials.
Essential Properties Realty Trust is a net lease real estate investment trust (REIT) that was founded in 2016 and went public in June 2018. The company’s portfolio consists of retail and service-oriented properties that we believe are well positioned for the ecommerce era and which are generally middle market in size and tenant profile. This has allowed them to provide attractive financing options otherwise unavailable to such tenants. The stock traded poorly at the time of the initial public offering due to a temporary spike in interest rates in the late summer of 2018, giving us an opportunity to own this attractive portfolio at what we believe is a discount to intrinsic value and capture an upfront yield of over 6%. With an under-levered balance sheet, we believe that Essential Properties has an attractive runway to grow its portfolio and prove itself as a differentiated player in the net lease industry.
Hudson Group operates over 200 airport retail concessions, which includes over 1,000 stores across 88 different transportation terminals with operations in 24 of the 25 largest airports in the United States and Canada. Hudson became a public company in February 2018 after spinning off from Dufry AG, a worldwide travel retail operator. Hudson Group has developed a strong competitive position and experienced secular growth trends in travel retail. We expect continued consolidation in the industry may benefit the large operators, and believe that Hudson may be an acquirer of smaller U.S. food and beverage players in order to gain more scale in the category and position itself for a faster win rate on new concessions. After adjusting for $170M of net operating losses on the balance sheet, Hudson has traded at an attractive EBITDA when compared to both travel peers and traditional growing retail peers.
Eagle Materials is a leading supplier of heavy construction materials, light building materials, and materials used in oil and gas extraction. The company sells commodity products and its relentless focus on being the low-cost provider in each of its markets has led to higher margins, returns, and free cash flow vs. its competitors over time. Eagle Materials’ stock came under significant
24
Brown Advisory Small-Cap Fundamental Value Fund
A Message to Our Shareholders
December 31, 2018
pressure throughout the year as a multitude of weather-related issues weighed on the company’s cement segment results. We believe that Street expectations for the cement business have finally corrected to a more reasonable level and the setup going forward looks favorable as the market continues tightening. Eagle is also coming off a record amount of capital expenditure over a trailing four-quarter period, and we believe that free cash flow is set to meaningfully improve which may lead to share repurchases.
Over the six-month period, there were 11 sales from the investments within the Fund, including Forest City Realty Trust, Synovus Financial Corporation, and Broadridge Financial Solutions.
While we are starting to see many new investment opportunities, we also continue seeing companies with challenged balance sheets and uncertain business models/prospects. Barely into 2019 as we write this letter, we have already started to see market commentators call for a rebound and point to the potential for a rapid rise in small-cap shares. While we acknowledge the macro factors to which both bulls and bears point, we believe that our process has the potential to enable us to approach the markets with caution and allow us to focus on opportunistic investments that we believe can generate attractive risk-adjusted returns.
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.
25
Brown Advisory Small-Cap Fundamental Value Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 88.4% | ||||||||
Communication Services — 6.8% | ||||||||
430,216 | GCI Liberty, Inc.* | 17,707,690 | ||||||
366,319 | Loral Space & Communications, Inc.* | 13,645,383 | ||||||
431,403 | Nexstar Broadcasting Group, Inc. | 33,925,532 | ||||||
65,278,605 | ||||||||
Consumer Discretionary — 16.8% | ||||||||
531,572 | Century Casinos, Inc.* | 3,928,317 | ||||||
536,605 | Core-Mark Holding Co., Inc. | 12,476,066 | ||||||
1,247,382 | Denny’s Corp.* | 20,220,062 | ||||||
305,074 | Dick’s Sporting Goods, Inc. | 9,518,309 | ||||||
696,394 | DSW, Inc. | 17,200,932 | ||||||
2,047,495 | Extended Stay America, Inc. | 31,736,173 | ||||||
1,063,528 | Hudson, Ltd.* | 18,239,505 | ||||||
235,583 | Lifetime Brands, Inc.† | 2,362,898 | ||||||
266,224 | Murphy USA, Inc.* | 20,403,407 | ||||||
1,315,985 | Regis Corp.* | 22,305,946 | ||||||
537,521 | Tile Shop Holdings, Inc. | 2,945,615 | ||||||
161,337,230 | ||||||||
Consumer Staples — 1.7% | ||||||||
398,539 | Spectrum Brands Holdings, Inc. | 16,838,273 | ||||||
Energy — 4.5% | ||||||||
143,680 | Natural Gas Services Group, Inc.* | 2,362,099 | ||||||
148,857 | REX American Resources Corp.* | 10,138,650 | ||||||
1,287,102 | Riviera Resources, Inc.* | 20,336,212 | ||||||
1,278,448 | Roan Resources, Inc.* | 10,713,394 | ||||||
43,550,355 | ||||||||
Financials — 25.3% | ||||||||
271,066 | Assurant, Inc. | 24,244,143 | ||||||
396,090 | Central Pacific Financial Corp. | 9,644,791 | ||||||
334,821 | Howard Bancorp, Inc.*† | 4,787,940 | ||||||
519,802 | National Bank Holdings Corp. | 16,046,288 | ||||||
876,077 | National General Holdings Corp. | 21,209,824 | ||||||
759,054 | OceanFirst Financial Corp. | 17,086,306 | ||||||
717,101 | Pacific Premier Bancorp, Inc.* | 18,300,418 | ||||||
47,107 | Peapack Gladstone Financial Corp. | 1,186,154 | ||||||
232,563 | Primerica, Inc. | 22,723,731 | ||||||
188,530 | Renasant Corp. | 5,689,835 | ||||||
536,257 | TCF Financial Corp. | 10,451,649 | ||||||
947,781 | TFS Financial Corp. | 15,287,708 | ||||||
456,485 | TriState Capital Holdings, Inc.* | 8,883,198 | ||||||
356,398 | Triumph Bancorp, Inc.* | 10,585,021 | ||||||
255,431 | Virtus Investment Partners, Inc. | 20,288,884 | ||||||
563,372 | Waddell & Reed Financial, Inc. | 10,185,766 | ||||||
821,268 | Washington Federal, Inc. | 21,936,068 | ||||||
131,599 | WesBanco, Inc. | 4,828,367 | ||||||
243,366,091 | ||||||||
Health Care — 3.1% | ||||||||
191,406 | Magellan Health, Inc.* | 10,889,087 | ||||||
319,288 | Providence Service Corp.* | 19,163,666 | ||||||
30,052,753 | ||||||||
Industrials — 18.4% | ||||||||
646,343 | Albany International Corp. | 40,351,193 | ||||||
221,153 | CRA International, Inc. | 9,410,060 | ||||||
629,084 | Federal Signal Corp. | 12,518,772 | ||||||
249,492 | Kadant, Inc. | 20,323,618 | ||||||
88,529 | Lydall, Inc.* | 1,798,024 | ||||||
517,333 | McGrath RentCorp | 26,632,303 | ||||||
1,688,410 | MRC Global, Inc.* | 20,649,254 | ||||||
1,822,938 | Mueller Water Products, Inc. | 16,588,736 | ||||||
539,727 | Simpson Manufacturing Co., Inc. | 29,215,423 | ||||||
177,487,383 | ||||||||
Information Technology — 8.2% | ||||||||
18,985 | Cabot Microelectronics Corp. | 1,810,181 | ||||||
427,156 | CTS Corp. | 11,059,069 | ||||||
892,415 | EchoStar Corp.* | 32,769,479 | ||||||
379,263 | MAXIMUS, Inc. | 24,686,229 | ||||||
278,452 | SMART Global Holdings, Inc.* | 8,270,024 | ||||||
78,594,982 | ||||||||
Materials — 2.1% | ||||||||
265,567 | Eagle Materials, Inc. | 16,207,554 | ||||||
72,919 | Neenah, Inc. | 4,296,388 | ||||||
20,503,942 | ||||||||
Real Estate — 0.6% | ||||||||
45,736 | Consolidated-Tomoka Land Co. | 2,401,140 | ||||||
306,776 | Landmark Infrastructure Partners L.P. | 3,537,127 | ||||||
5,938,267 | ||||||||
Utilities — 0.9% | ||||||||
924,210 | Star Group L.P.† | 8,632,121 | ||||||
Total Common Stocks (Cost $788,466,015) | 851,580,002 | |||||||
Real Estate Investment Trusts — 7.2% | ||||||||
1,436,176 | Essential Properties Realty Trust, Inc. | 19,876,676 | ||||||
2,888,696 | MFA Financial, Inc. | 19,296,489 | ||||||
533,257 | PotlatchDeltic Corp. | 16,872,252 | ||||||
746,772 | Xenia Hotels & Resorts, Inc. | 12,844,478 | ||||||
Total Real Estate Investment Trusts (Cost $71,969,193) | 68,889,895 | |||||||
Investment Companies — 2.9% | ||||||||
1,114,584 | Ares Capital Corp. | 17,365,219 | ||||||
1,197,763 | Barings BDC, Inc. | 10,791,844 | ||||||
Total Investment Companies (Cost $32,020,600) | 28,157,063 | |||||||
Short-Term Investments — 2.6% | ||||||||
Money Market Funds — 2.6% | ||||||||
25,430,963 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 25,430,963 | |||||||
Total Short-Term Investments (Cost $25,430,963) | 25,430,963 | |||||||
Total Investments — 101.1% (Cost $917,886,771) | 974,057,923 | |||||||
Liabilities in Excess of Other Assets — (1.1)% | (10,739,988 | ) | ||||||
NET ASSETS — 100.0% | $ | 963,317,935 |
* | Non-Income Producing |
† | All or a portion of this security is considered illiquid. At December 31, 2018 the total market value of securities considered illiquid was $7,069,833 or 0.7% of net assets. |
# | Annualized seven-day yield as of December 31, 2018. |
The accompanying notes are an integral part of these financial statements.
26
Brown Advisory Small-Cap Fundamental Value Fund
Schedule of Investments
December 31, 2018 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
Financials | 25.3% |
Industrials | 18.4% |
Consumer Discretionary | 16.8% |
Information Technology | 8.2% |
Real Estate Investment Trusts | 7.2% |
Communication Services | 6.8% |
Energy | 4.5% |
Health Care | 3.1% |
Investment Companies | 2.9% |
Money Market Funds | 2.6% |
Materials | 2.1% |
Consumer Staples | 1.7% |
Utilities | 0.9% |
Real Estate | 0.6% |
Other Assets and Liabilities | (1.1)% |
100.0% |
The accompanying notes are an integral part of these financial statements.
27
Brown Advisory Global Leaders Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Global Leaders Fund – Investor Shares (the “Fund”) decreased 8.08% in value. During the same period, the fund’s benchmark, the Russell Global Large Cap Index (the “Index”), declined 9.22%.
For the six-month period ended December 31, 2018 equity markets experience a reversal of fortunes from the previously buoyant period driven by an about-face in investor sentiment. While it is hard to precisely point out the major drivers of changes in the mood of market participants, the prevailing narrative towards the end of 2018 coalesced around concerns of rising interest rates and a slowing global economy. The Fund is focused on delivering long-term performance by buying a concentrated portfolio of industry-leading companies that we believe uniquely satisfy their customers and generate what we view as favorable economics for shareholders. Although we are acutely aware of the economic environment, we are stock pickers and our primary focus is on the operational performances of the franchises in which we invest and their ability to generate cash flow. As a result, our sector attribution is primarily an output of our stock-picking. For the covered period, our holdings in information technology and financials were the main areas of outperformance. It is gratifying to see continued outperformance from our financials holdings as financial business models are not always obvious candidates for a quality-biased investment strategy. We believe that each of our holdings in this sector provide unique services to their customers and our exposure is a major differentiator from other quality-focused global equity strategies. On the negative front, communication services and consumer discretionary were the two main areas that detracted from performance with the impact being entirely stock-specific.
Our holdings in Asian banks, Indonesia’s PT Bank Rakyat and India’s HDFC Bank, were two of the main positive contributors to performance during the period. Both institutions have continued to benefit from prudent underwriting in underpenetrated banking markets that have fostered healthy loan growth. Indeed Bank Rakyat was the largest single positive contributor to performance during the half as business fundamentals combined with receding currency concerns and increasing positive investor sentiment towards emerging markets to drive share price gains.
Elsewhere, recent addition Wolters Kluwer was another major contributor to the Fund’s performance in the period. This Dutch company has continued to metamorphose from a professional publisher to a digital workflow solutions provider with a higher returning more cash generative business model. A string of encouraging releases resulted in our only health care investment, Edwards Lifesciences, being another major positive contributor to returns during the half. Growing evidence that its position in the TAVR heart valve market is sustainable at a time when new patient cohorts are becoming available for treatment buoyed the company’s share price. The final major contributor to performance during the period was core holding Microsoft, which has continued to benefit from the ongoing migration of customers towards cloud products.
On the negative front Electronic Arts (“EA”) was the largest single detractor from performance during the period after the company revised its outlook for its 2019 financial year. We still see significant value in EA’s sports franchise and see further benefits as EA’s business model continues shifting towards digital with downloading, and eventually streaming, which has the potential to improve the economics for shareholders over time. Elsewhere, new investment Ctrip’s shares were weak after the company revised its 2018 outlook due to macroeconomic headwinds. We believe that Ctrip is uniquely positioned to potentially benefit from the Chinese consumer’s growing appetite for travel in a country where only a fraction of citizens have a passport.
The Fund has a strict drawdown review process where we automatically review a holding if it falls either 20% since initiation or underperforms the strategy’s benchmark by 20% over a rolling 12-month basis. We believe that this facet of our process enables us to nip loss aversion–one of the most damaging behavioural traits in investment–in the bud as we have to either add or exit significant losing positions that we review. We sold one of our largest detractors from performance, eBay, during the period following a drawdown review. In the case of eBay, we believe that the investment thesis had shifted due to structural, competitive challenges on the supply side. We similarly disposed of Japanese catering equipment manufacturer Hoshizaki after a period of weakness. Hoshizaki’s shares were weak in the period due to an internal investigation on conduct at one of its sales subsidiaries at the end of October. The lengthiness of the investigation caused us to lose confidence in management’s control of the company and we decided to exit our investment. We sold the last major detractor from performance–Facebook–in order to fully build the position in Tencent Holdings that we initiated during the third quarter. We were particularly concerned when the founders of Instagram, WhatsApp and Oculus (all companies Facebook has acquired) all left within the last year. We viewed this exodus as being a by-product of Facebook trying to drive more advertising onto its platforms, which risks further user disengagement. Additionally, from a capital allocation perspective, we did not want 10% of our clients’ capital exposed to advertising-driven business models and favored our investments in Google and Tencent over Facebook.
28
Brown Advisory Global Leaders Fund
A Message to Our Shareholders
December 31, 2018
There were two meaningful additions during the period, Tencent Holdings and Marvell Technology Group. After extensive work and monitoring we patiently built our Tencent position during the half. We see significant optionality in the company’s technology platforms and we used a temporary hiatus over gaming approvals to invest in China’s premier digital ecosystem at an attractive valuation. Elsewhere we initiated a new position in semi-conductor specialist Marvell. The company has had leading positions in storage and communications niches and significant self-help potential following its recent acquisition of competitor Cavium.
The Fund invests in what we view as market-leading companies from across the globe that attempt to deliver exceptional customer outcomes. We believe that companies that combine a superior outcome for their customers with strong leadership have the potential to generate high and sustainable returns on invested capital (“ROIC”), which can lead to outstanding shareholder returns. We focus on the long-term and look for franchises that have the potential to compound excess economic profit at above-market growth rates for extended periods of time. Although we don’t try and second guess the ebbs and flows of the world economy, the current investor narrative has coalesced around expectations of slowing global growth. Although such a scenario is by no means certain, we take comfort from the strategy’s quality bias, aggregate ROIC profile and what we believe to be attractive absolute and relative valuations at which our underlying securities trade. Although there are no certainties in investing, we view these characteristics as standing the strategy in good stead to have the potential to continue creating value for our clients in a variety of scenarios – which may include an economic slowdown.
Sincerely,
Michael Dillon,
Portfolio Manager
Bertie Thomson,
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.
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.
29
Brown Advisory Global Leaders Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 92.2% | ||||||||
China — 8.1% | ||||||||
540,883 | AIA Group, Ltd. | 4,493,015 | ||||||
106,582 | Ctrip.com International, Ltd. ADR* | 2,884,109 | ||||||
99,158 | Tencent Holdings, Ltd. | 3,974,287 | ||||||
25 | Tencent Music Entertainment Group* | 328 | ||||||
11,351,739 | ||||||||
France — 3.0% | ||||||||
34,536 | Safran SA | 4,142,079 | ||||||
Germany — 4.3% | ||||||||
84,451 | CTS Eventim AG & Co. KGaA | 3,153,723 | ||||||
24,318 | Deutsche Boerse AG | 2,907,349 | ||||||
6,061,072 | ||||||||
India — 2.8% | ||||||||
128,350 | HDFC Bank, Ltd. | 3,904,387 | ||||||
Indonesia — 2.7% | ||||||||
14,889,700 | Bank Rakyat Indonesia Persero | 3,793,276 | ||||||
Netherlands — 3.5% | ||||||||
83,392 | Wolters Kluwer NV | 4,904,054 | ||||||
Sweden — 2.8% | ||||||||
179,694 | Atlas Copco AB | 3,937,416 | ||||||
Switzerland — 3.1% | ||||||||
21,905 | Schindler Holding AG | 4,257,483 | ||||||
Taiwan — 3.1% | ||||||||
115,218 | Taiwan Semiconductor | |||||||
Manufacturing Co., Ltd. ADR | 4,252,696 | |||||||
United Kingdom — 7.5% | ||||||||
180,312 | Hiscox, Ltd. | 3,726,780 | ||||||
128,717 | Unilever PLC | 6,758,004 | ||||||
10,484,784 | ||||||||
United States — 51.3% | ||||||||
Communication Services — 7.2% | ||||||||
6,755 | Alphabet, Inc. — Class C* | 6,995,546 | ||||||
38,054 | Electronic Arts, Inc.* | 3,002,841 | ||||||
9,998,387 | ||||||||
Consumer Discretionary — 4.7% | ||||||||
2,249 | Booking Holdings, Inc.* | 3,873,723 | ||||||
61,087 | TJX Companies, Inc. | 2,733,032 | ||||||
6,606,755 | ||||||||
Consumer Staples — 5.6% | ||||||||
67,914 | Brown-Forman Corp. | 3,231,348 | ||||||
34,743 | Estee Lauder Companies, Inc. | 4,520,064 | ||||||
7,751,412 | ||||||||
Financials — 5.3% | ||||||||
68,558 | Charles Schwab Corp. | 2,847,214 | ||||||
46,344 | JPMorgan Chase & Co. | 4,524,101 | ||||||
7,371,315 | ||||||||
Health Care — 3.0% | ||||||||
27,731 | Edwards Lifesciences Corp.* | 4,247,557 | ||||||
Industrials — 3.6% | ||||||||
14,341 | 3M Co. | 2,732,534 | ||||||
59,448 | Flowserve Corp. | 2,260,213 | ||||||
4,992,747 | ||||||||
Information Technology — 17.5% | ||||||||
34,556 | Cognizant Technology Solutions Corp. | 2,193,615 | ||||||
160,337 | Marvell Technology Group, Ltd. | 2,595,856 | ||||||
24,352 | MasterCard, Inc. | 4,594,005 | ||||||
83,939 | Microsoft Corp. | 8,525,684 | ||||||
49,398 | Visa, Inc. | 6,517,572 | ||||||
24,426,732 | ||||||||
Materials — 4.4% | ||||||||
20,852 | Ecolab, Inc. | 3,072,543 | ||||||
7,629 | Sherwin-Williams Co. | 3,001,706 | ||||||
6,074,249 | ||||||||
Total United States | 71,469,154 | |||||||
Total Common Stocks (Cost $124,403,288) | 128,558,140 | |||||||
Short-Term Investments — 5.1% | ||||||||
Money Market Funds — 5.1% | ||||||||
7,170,632 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 7,170,632 | |||||||
Total Short-Term Investments (Cost $7,170,632) | 7,170,632 | |||||||
Total Investments — 97.3% (Cost $131,573,920) | 135,728,772 | |||||||
Other Assets in Excess of Liabilities — 2.7% | 3,773,541 | |||||||
NET ASSETS — 100.0% | $ | 139,502,313 |
ADR — American Depositary Receipt
* | Non-Income Producing |
# | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Information Technology | 20.6% |
Financials | 18.8% |
Industrials | 15.9% |
Communication Services | 12.3% |
Consumer Staples | 10.4% |
Consumer Discretionary | 6.8% |
Money Market Funds | 5.1% |
Materials | 4.4% |
Health Care | 3.0% |
Other Assets and Liabilities | 2.7% |
100.0% |
The accompanying notes are an integral part of these financial statements.
30
Brown Advisory Intermediate Income Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Intermediate Income Fund – Investor Shares (the “Fund”) was up 1.22%, trailing the 1.91% return for the Fund’s benchmark, the Bloomberg Barclays Intermediate US Aggregate Bond Index (the “Index”).
The Fund aims to generate performance primarily through individual security analysis, supported by a detailed and disciplined credit process. Our analysis of intermediate-term risk/reward, as opposed to any particular macro forecast, primarily drives our duration and sector weightings.
The second half of 2018 was a tumultuous period for the fixed income markets. Spreads of all types widened significantly, especially during the fourth quarter, where investment-grade corporate bonds had their worst quarter since 2011. Our investment philosophy of seeking alpha through individual bond selection naturally leads us to owning more spread bonds and fewer Treasury bonds. While this was detrimental to performance in the most recent period, this has been a major driver of the Fund’s strong longer-term track record.
Specifically, as the weakness in credit was broad based, our underweight allocation to Treasury bonds was the biggest single detractor to performance, subtracting about 48 bps from relative performance. Although our holdings were strong absolute performers, we held less Treasury bonds than the Index weighting.
During the period, our longer mortgage bonds experienced slightly faster prepayments on average than the Index equivalents, resulting in 36 bps of relative underperformance. We believe that over time, our focus on prepayment analysis, has the potential to enable us to identify bonds that will repay principal more slowly and generate more interest over the life of the bond.
Other credit-oriented sectors also underperformed Treasury bonds, including asset-backed and commercial mortgage-backed securities. However, our holdings in these sectors are generally higher-quality and/or shorter-term, which ameliorated spread widening.
While we are always disappointed about periods of underperformance, we are pleased with the portfolio’s potential looking forward. Our intense focus on downside analysis is designed to help us navigate periods like this. We come in with a strong idea of how a bond should perform in an adverse market, and we believe this gives the Fund the potential to weather periods of volatility from a position of strength. In the long run, we believe that this focus on downside risk plus a strong level of income generation has the potential to result in strong performance.
Sincerely,
Paul D. Corbin
Portfolio Manager
Jason T. Vlosich
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund is subject to interest rate risk which is the risk that debt securities in the Fund’s portfolio will decline in value because of increases in market interest rates. Investments in Asset Backed and Mortgage Backed Securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. Inflation-indexed bonds see the principal value of the security increased as the Consumer Price Index increases. Should the Consumer Price Index decline, those securities should be adversely impacted.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
31
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Corporate Bonds & Notes — 25.8% | |||||||||||||
1,345,000 | AerCap Ireland Capital DAC | 3.30 | % | 01/23/2023 | 1,279,902 | ||||||||
1,280,000 | American Express Co. (3 Month LIBOR USD + 0.75%) | 3.33 | % | 08/03/2023 | 1,255,929 | ||||||||
1,390,000 | American Tower Corp. | 2.25 | % | 01/15/2022 | 1,331,203 | ||||||||
665,000 | Analog Devices, Inc. | 3.13 | % | 12/05/2023 | 646,674 | ||||||||
1,255,000 | Apache Corp. | 4.38 | % | 10/15/2028 | 1,174,463 | ||||||||
1,365,000 | AstraZeneca PLC | 1.95 | % | 09/18/2019 | 1,355,409 | ||||||||
630,000 | AutoZone, Inc. | 2.50 | % | 04/15/2021 | 616,395 | ||||||||
1,205,000 | Bank of America Corp. (3 Month LIBOR USD + 1.16%) | 3.63 | % | 01/20/2023 | 1,204,633 | ||||||||
1,330,000 | BB&T Corp. | 2.75 | % | 04/01/2022 | 1,308,414 | ||||||||
645,000 | Boston Properties L.P. | 3.85 | % | 02/01/2023 | 646,719 | ||||||||
625,000 | BP Capital Markets America, Inc. | 3.80 | % | 09/21/2025 | 628,552 | ||||||||
1,306,000 | CC Holdings GS V LLC | 3.85 | % | 04/15/2023 | 1,294,580 | ||||||||
665,000 | Clorox Co. | 3.05 | % | 09/15/2022 | 658,448 | ||||||||
970,000 | Digital Realty Trust L.P. | 3.95 | % | 07/01/2022 | 976,517 | ||||||||
650,000 | Dollar General Corp. | 4.15 | % | 11/01/2025 | 649,830 | ||||||||
1,025,000 | Enterprise Products Operating LLC (Fixed until 08/16/2027, then 3 Month LIBOR USD + 3.03%) | 5.25 | % | 08/16/2077 | 855,592 | ||||||||
665,000 | Exelon Corp. | 2.45 | % | 04/15/2021 | 650,752 | ||||||||
1,275,000 | Express Scripts Holding Co. | 4.50 | % | 02/25/2026 | 1,294,159 | ||||||||
1,500,000 | Ferguson Finance PLC^ | 4.50 | % | 10/24/2028 | 1,501,443 | ||||||||
620,000 | Fidelity National Information Services, Inc. | 5.00 | % | 10/15/2025 | 645,834 | ||||||||
645,000 | General Dynamics Corp. | 3.50 | % | 05/15/2025 | 642,910 | ||||||||
1,295,000 | Goldman Sachs Group, Inc. (3 Month LIBOR USD + 0.75%) | 3.43 | % | 02/23/2023 | 1,252,279 | ||||||||
1,181,000 | Hasbro, Inc. | 3.50 | % | 09/15/2027 | 1,097,065 | ||||||||
675,000 | Healthcare Trust of America Holdings L.P. | 3.75 | % | 07/01/2027 | 643,848 | ||||||||
655,000 | JB Hunt Transport Services, Inc. | 3.30 | % | 08/15/2022 | 650,224 | ||||||||
685,000 | Kroger Co. | 3.70 | % | 08/01/2027 | 647,822 | ||||||||
1,210,000 | Land O’Lakes, Inc.^ | 6.00 | % | 11/15/2022 | 1,263,838 | ||||||||
1,375,000 | Lear Corp. | 3.80 | % | 09/15/2027 | 1,258,285 | ||||||||
670,000 | Morgan Stanley | 2.63 | % | 11/17/2021 | 654,207 | ||||||||
640,000 | MPLX L.P. | 4.80 | % | 02/15/2029 | 639,692 | ||||||||
1,310,000 | Noble Energy, Inc. | 3.85 | % | 01/15/2028 | 1,186,608 | ||||||||
1,347,000 | Royal Bank of Canada (3 Month LIBOR USD + 0.73%) | 3.27 | % | 02/01/2022 | 1,337,224 | ||||||||
640,000 | Verizon Communications, Inc. (3 Month LIBOR USD + 1.00%) | 3.79 | % | 03/16/2022 | 640,986 | ||||||||
650,000 | West Fraser Timber Co., Ltd.^ | 4.35 | % | 10/15/2024 | 644,881 | ||||||||
1,215,000 | Weyerhaeuser Co. | 7.38 | % | 10/01/2019 | 1,248,671 | ||||||||
Total Corporate Bonds & Notes (Cost $34,613,610) | 33,783,988 | ||||||||||||
Asset Backed Securities — 16.7% | |||||||||||||
112,603 | AmeriCredit Automobile Receivables Trust, Series 2015-3 B | 2.08 | % | 09/08/2020 | 112,551 | ||||||||
610,824 | Colony Starwood Homes Trust, Series 2016-2A A (1 Month LIBOR USD + 1.25%)^ | 3.71 | % | 12/19/2033 | 612,546 | ||||||||
428,699 | Continental Airlines Trust, Series 1999-1 A | 6.55 | % | 08/02/2020 | 429,796 | ||||||||
500,000 | Dell Equipment Finance Trust, Series 2018-1 D^ | 3.97 | % | 10/22/2024 | 508,042 | ||||||||
1,000,000 | Drive Auto Receivables Trust, Series 2017-3 D^ | 3.53 | % | 12/15/2023 | 1,001,229 | ||||||||
1,550,000 | Drive Auto Receivables Trust, Series 2018-1 B | 2.88 | % | 02/15/2022 | 1,548,174 | ||||||||
800,000 | Drive Auto Receivables Trust, Series 2018-1 C | 3.22 | % | 03/15/2023 | 798,603 | ||||||||
500,000 | Drive Auto Receivables Trust, Series 2018-2 C | 3.63 | % | 08/15/2024 | 502,284 | ||||||||
670,000 | Drive Auto Receivables Trust, Series 2018-4 C | 3.66 | % | 11/15/2024 | 673,022 | ||||||||
500,000 | DT Auto Owner Trust, Series 2017-4A C^ | 2.86 | % | 07/17/2023 | 498,659 | ||||||||
1,000,000 | DT Auto Owner Trust, Series 2018-3A B^ | 3.56 | % | 09/15/2022 | 1,005,037 | ||||||||
638,884 | Federal Express Corp., Series 1998-1 | 6.72 | % | 07/15/2023 | 668,600 | ||||||||
734,000 | Invitation Homes Trust, Series 2018-SFR1 C (1 Month LIBOR USD + 1.25%)^ | 3.71 | % | 03/19/2037 | 727,118 | ||||||||
500,000 | Madison Park Funding XV, Ltd., Series 2014-15A A2R (3 Month LIBOR USD + 1.50%)^ | 4.01 | % | 01/27/2026 | 499,954 | ||||||||
1,000,000 | Neuberger Berman Loan Advisers CLO 26, Ltd., | ||||||||||||
Series 2017-26A A (3 Month LIBOR USD + 1.17%)^ | 3.61 | % | 10/18/2030 | 994,652 | |||||||||
1,500,000 | Octagon Investment Partners 24, Ltd., Series 2015-1A A2AR (3 Month LIBOR USD + 1.35%)^ | 4.00 | % | 05/21/2027 | 1,474,396 | ||||||||
1,000,000 | Octagon Investment Partners 30, Ltd., Series 2017-1A B (3 Month LIBOR USD + 2.35%)^ | 4.82 | % | 03/17/2030 | 971,641 |
The accompanying notes are an integral part of these financial statements.
32
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Asset Backed Securities — 16.7% (Continued) | |||||||||||||
400,000 | Oportun Funding X LLC, Series 2018-C A^ | 4.10 | % | 10/08/2024 | 404,113 | ||||||||
1,500,000 | OZLM XIII, Ltd., Series 2015-13A A2R (3 Month LIBOR USD + 1.65%)^ | 4.17 | % | 07/30/2027 | 1,467,604 | ||||||||
1,232,617 | Progress Residential Trust, Series 2015-SFR2 A^ | 2.74 | % | 06/14/2032 | 1,217,414 | ||||||||
753,284 | Progress Residential Trust, Series 2015-SFR3 A^ | 3.07 | % | 11/15/2032 | 746,755 | ||||||||
1,300,000 | Santander Drive Auto Receivables Trust 2017-2, Series 2017-2 B | 2.21 | % | 10/15/2021 | 1,296,502 | ||||||||
439,397 | Seneca Park CLO, Ltd., Series 2014-1A AR (3 Month LIBOR USD + 1.12%)^ | 3.57 | % | 07/17/2026 | 438,498 | ||||||||
750,000 | Treman Park CLO, Ltd., Series 2015-1A ARR (3 Month LIBOR USD + 1.07%)^ | 3.53 | % | 10/20/2028 | 747,654 | ||||||||
592,000 | Verizon Owner Trust, Series 2016-2A B^ | 2.15 | % | 05/20/2021 | 585,276 | ||||||||
424,000 | Verizon Owner Trust, Series 2017-1A B^ | 2.45 | % | 09/20/2021 | 420,963 | ||||||||
300,000 | Verizon Owner Trust, Series 2018-1A C^ | 3.20 | % | 09/20/2022 | 300,436 | ||||||||
500,000 | Verizon Owner Trust, Series 2018-A C | 3.55 | % | 04/20/2023 | 505,199 | ||||||||
770,000 | Westlake Automobile Receivables Trust, Series 2017-1A D^ | 3.46 | % | 10/17/2022 | 767,245 | ||||||||
Total Asset Backed Securities (Cost $22,025,944) | 21,923,963 | ||||||||||||
Mortgage Backed Securities — 11.1% | |||||||||||||
700,000 | BAMLL Commercial Mortgage Securities Trust, | ||||||||||||
Series 2018-DSNY C (1 Month LIBOR USD + 1.35%)^ | 3.81 | % | 09/15/2034 | 697,834 | |||||||||
998,510 | BX Commercial Mortgage Trust, Series 2018-IND B (1 Month LIBOR USD + 0.90%)^ | 3.36 | % | 11/15/2035 | 991,571 | ||||||||
1,583 | FHLMC PC, Pool# C0-0210 | 8.00 | % | 01/01/2023 | 1,668 | ||||||||
286,913 | FHLMC PC, Pool# 1B-0889 (12 Month LIBOR USD + 1.59%) | 3.95 | % | 05/01/2033 | 300,459 | ||||||||
25,257 | FHLMC REMIC, Series 2782 PA | 4.00 | % | 11/15/2033 | 25,178 | ||||||||
1,600,000 | FHMS, Series K-042 A2 | 2.67 | % | 12/25/2024 | 1,569,522 | ||||||||
1,525,000 | FHMS, Series K-046 A2 | 3.21 | % | 03/25/2025 | 1,536,872 | ||||||||
700,000 | FHMS, Series K-047 A2# | 3.33 | % | 05/25/2025 | 710,356 | ||||||||
1,550,000 | FHMS, Series K-048 A2# | 3.28 | % | 06/25/2025 | 1,569,003 | ||||||||
881,733 | FHMS, Series Q-006 APT1# | 2.58 | % | 04/25/2028 | 932,284 | ||||||||
36,358 | FNMA, Pool# 628837 | 6.50 | % | 03/01/2032 | 39,548 | ||||||||
76,575 | FNMA, Pool# 663238 | 5.50 | % | 09/01/2032 | 81,064 | ||||||||
31,649 | FNMA, Pool# 744805 (6 Month LIBOR USD + 1.52%) | 4.02 | % | 11/01/2033 | 31,957 | ||||||||
11,961 | FNMA, Pool# 741373 (1 Year CMT Rate + 2.28%) | 4.78 | % | 12/01/2033 | 12,417 | ||||||||
28,348 | FNMA, Pool# 764342 (6 Month LIBOR USD + 1.52%) | 4.02 | % | 02/01/2034 | 29,154 | ||||||||
24,506 | FNMA, Pool# 848817 | 5.00 | % | 01/01/2036 | 25,832 | ||||||||
747,370 | FNMA, Pool# BJ4070 | 4.00 | % | 09/01/2048 | 767,218 | ||||||||
388,428 | FNMA, Pool# BJ4072 | 4.50 | % | 09/01/2048 | 407,422 | ||||||||
428,503 | FNMA, Pool# BJ4073 | 4.50 | % | 09/01/2048 | 449,060 | ||||||||
358,946 | FNMA, Pool# BJ4075 | 5.00 | % | 09/01/2048 | 382,651 | ||||||||
516,900 | FNMA, Pool# BJ4078 | 4.50 | % | 10/01/2048 | 541,455 | ||||||||
641,465 | FNMA, Pool# BJ4079 | 5.00 | % | 10/01/2048 | 682,342 | ||||||||
199,227 | FNMA, Pool# BN0202 | 5.50 | % | 09/01/2048 | 213,188 | ||||||||
499,463 | FNMA REMIC Trust, Series 2018-M13 A1# | 3.82 | % | 09/25/2030 | 526,906 | ||||||||
1,226,108 | FNMA REMIC Trust, Series 2013-115 AI~ | 3.00 | % | 04/25/2031 | 135,732 | ||||||||
12,412 | GNMA, Pool# 487110X | 6.50 | % | 04/15/2029 | 13,783 | ||||||||
23,918 | GNMA, Pool# 781186X | 9.00 | % | 06/15/2030 | 25,671 | ||||||||
5,771 | GNMA, Pool# 571166X | 7.00 | % | 08/15/2031 | 5,864 | ||||||||
1,000,000 | GSMS, Series 2018-FBLU C (1 Month LIBOR USD + 1.60%)^ | 4.06 | % | 11/15/2035 | 994,021 | ||||||||
900,000 | MSC, Series 2017-CLS A (1 Month LIBOR USD + 0.70%)^ | 3.16 | % | 11/15/2034 | 887,007 | ||||||||
Total Mortgage Backed Securities (Cost $14,647,277) | 14,587,039 | ||||||||||||
Municipal Bonds — 8.2% | |||||||||||||
670,000 | District of Columbia | 4.71 | % | 12/01/2022 | 713,912 | ||||||||
1,600,000 | District of Columbia# | 6.71 | % | 08/01/2038 | 1,600,000 | ||||||||
1,000,000 | Illinois, State of | 2.30 | % | 06/15/2019 | 994,780 | ||||||||
1,390,000 | Maryland Health & Higher Educational Facilities Authority | 3.43 | % | 07/01/2023 | 1,397,200 | ||||||||
2,000,000 | Miami-Dade County Florida Aviation | 2.37 | % | 10/01/2023 | 1,948,420 | ||||||||
1,315,000 | New York State Dormitory Authority | 4.00 | % | 07/01/2039 | 1,318,077 | ||||||||
1,250,000 | North Texas Tollway Authority | 8.91 | % | 02/01/2030 | 1,322,525 |
The accompanying notes are an integral part of these financial statements.
33
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Municipal Bonds — 8.2% (Continued) | |||||||||||||
470,000 | Regional Transportation Authority | 3.01 | % | 05/29/2020 | 470,094 | ||||||||
1,000,000 | Texas A&M University | 3.23 | % | 05/15/2027 | 992,090 | ||||||||
Total Municipal Bonds (Cost $10,844,095) | 10,757,098 | ||||||||||||
U.S. Treasury Notes — 14.9% | |||||||||||||
100,000 | United States Treasury Note | 1.38 | % | 02/29/2020 | 98,613 | ||||||||
1,985,000 | United States Treasury Note | 1.88 | % | 08/31/2022 | 1,942,974 | ||||||||
1,500,000 | United States Treasury Note | 2.88 | % | 11/30/2025 | 1,527,188 | ||||||||
15,710,000 | United States Treasury Note | 2.88 | % | 05/15/2028 | 15,954,548 | ||||||||
Total U.S. Treasury Notes (Cost $19,224,131) | 19,523,323 | ||||||||||||
Affiliated Mutual Funds (Note 3) — 20.1% | |||||||||||||
2,728,260 | Brown Advisory Mortgage Securities Fund — Institutional Shares | 26,354,995 | |||||||||||
Total Affiliated Mutual Funds (Cost $27,356,612) | 26,354,995 | ||||||||||||
Short-Term Investments — 2.6% | |||||||||||||
Money Market Funds — 2.6% | |||||||||||||
3,381,570 | First American Government Obligations Fund — Class Z, 2.32%* | 3,381,570 | |||||||||||
Total Short-Term Investments (Cost $3,381,570) | 3,381,570 | ||||||||||||
Total Investments — 99.4% (Cost $132,093,239) | 130,311,976 | ||||||||||||
Other Assets in Excess of Liabilities — 0.6% | 828,556 | ||||||||||||
NET ASSETS — 100.0% | $ | 131,140,532 |
# | Variable rate security. Rate disclosed is as of December 31, 2018. |
^ | 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, 2018, the value of these securities amounted to $22,369,827 or 17.1% of net assets. |
* | Annualized seven-day yield as of December 31, 2018. |
~ | Interest Only Security |
PORTFOLIO HOLDINGS
% of Net Assets
Corporate Bonds & Notes | 25.8% |
Affiliated Mutual Funds | 20.1% |
Asset Backed Securities | 16.7% |
U.S. Treasury Notes | 14.9% |
Mortgage Backed Securities | 11.1% |
Municipal Bonds | 8.2% |
Money Market Funds | 2.6% |
Other Assets and Liabilities | 0.6% |
100.0% |
The accompanying notes are an integral part of these financial statements.
34
Brown Advisory Total Return Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ending December 31, 2018, the Brown Advisory Total Return Fund – Institutional Shares (the “Fund”) returned 0.80%, trailing the 1.65% return for the Fund’s benchmark, the Bloomberg Barclays US Aggregate Bond Index (the “Index”).
The Fund aims to generate performance primarily through individual security analysis, supported by a detailed and disciplined credit process and a focus on capital preservation. Analysis of the intermediate-term risk/reward, as opposed to any particular macro forecast, drives our duration and sector weightings.
The second half of 2018 was a tumultuous period for credit markets. Spreads of all types widened significantly, especially during the fourth quarter, where both high-yield and investment-grade corporate bonds had their worst quarters since 2011. Our investment philosophy of seeking alpha through individual bond selection naturally leads us to owning more spread bonds and fewer Treasury bonds. While this was detrimental to performance in the most recent period, this has been a major driver of the Fund’s strong longer-term track record.
Specifically, our corporate bond positions were the biggest single detractor to performance, subtracting about 51bps from relative performance. Underperformance in credit was broad-based, although our high-yield positions underperformed other positions.
Other credit-oriented sectors also underperformed Treasury bonds, including asset-backed and commercial mortgage-backed securities. Our holdings in these sectors, however, are generally higher-quality and/or shorter-term, which ameliorated spread widening.
While we are always disappointed about periods of underperformance, we are pleased with the portfolio’s potential looking forward. Our intense focus on downside analysis is designed to help us navigate periods like this. We come in with a strong idea of how a bond should perform in an adverse market, and we believe that this gives the Fund the potential to weather periods of volatility from a position of strength. In the long run, we believe that this focus on downside plus a strong level of income generation has the potential to result in strong 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. 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.
35
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Asset Backed Securities — 29.4% | ||||||||||||
320,000 | American Homes 4 Rent, Series 2015-SFR1 D^ | 4.41 | % | 04/18/2052 | 325,002 | |||||||
1,145,000 | AmeriCredit Automobile Receivables, Series 2016-1 C | 2.89 | % | 01/10/2022 | 1,141,417 | |||||||
108,963 | BRE Grand Islander Timeshare Issuer LLC, Series 2017-1A A^ | 2.94 | % | 05/25/2029 | 107,640 | |||||||
750,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2015-1A CR (3 Month LIBOR USD + 2.00%)^ | 4.47 | % | 04/20/2027 | 738,866 | |||||||
1,000,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2015-2A CR (3 Month LIBOR USD + 2.25%)^ | 4.76 | % | 04/27/2027 | 938,699 | |||||||
799,043 | Colony Starwood Homes Trust, Series 2016-2A A (1 Month LIBOR USD + 1.25%)^ | 3.71 | % | 12/19/2033 | 801,296 | |||||||
286,364 | Continental Airlines Trust, Series 1999-1 A | 6.55 | % | 08/02/2020 | 287,097 | |||||||
235,000 | CPS Auto Receivables Trust, Series 2015-C D^ | 4.63 | % | 08/16/2021 | 237,987 | |||||||
300,000 | CPS Auto Receivables Trust, Series 2016-C E^ | 8.39 | % | 09/15/2023 | 316,720 | |||||||
750,000 | Dell Equipment Finance Trust, Series 2018-2 D^ | 3.97 | % | 10/22/2024 | 762,063 | |||||||
1,695,000 | Drive Auto Receivables Trust, Series 2018-1 C | 3.22 | % | 03/15/2023 | 1,692,041 | |||||||
1,615,000 | Drive Auto Receivables Trust, Series 2017-3 D^ | 3.53 | % | 12/15/2023 | 1,616,985 | |||||||
1,500,000 | Drive Auto Receivables Trust, Series 2018-1 D | 3.81 | % | 05/15/2024 | 1,503,271 | |||||||
400,000 | Drive Auto Receivables Trust, Series 2018-2 D | 4.14 | % | 08/15/2024 | 403,489 | |||||||
700,000 | Drive Auto Receivables Trust, Series 2018-3 D | 4.30 | % | 09/16/2024 | 710,321 | |||||||
900,000 | DT Auto Owner Trust, Series 2017-4A D^ | 3.47 | % | 07/17/2023 | 897,652 | |||||||
750,000 | DT Auto Owner Trust, Series 2018-1A C^ | 3.47 | % | 12/15/2023 | 752,042 | |||||||
500,000 | DT Auto Owner Trust, Series 2018-2A C^ | 3.67 | % | 03/15/2024 | 502,576 | |||||||
1,000,000 | DT Auto Owner Trust, Series 2018-3A D^ | 4.19 | % | 07/15/2024 | 1,005,885 | |||||||
600,000 | DT Auto Owner Trust, Series 2017-3A E^ | 5.60 | % | 08/15/2024 | 614,402 | |||||||
574,996 | Federal Express Corp., Series 1998-1 | 6.72 | % | 07/15/2023 | 601,740 | |||||||
2,000,000 | GoldenTree Loan Opportunities XI, Ltd., | |||||||||||
Series 2015-11A AR2 FLT (3 Month LIBOR USD + 1.07%)^ | 3.51 | % | 01/21/2031 | 1,965,782 | ||||||||
300,000 | GreatAmerica Leasing Receivables Funding LLC, Series 2018-1 C^ | 3.14 | % | 06/16/2025 | 294,383 | |||||||
500,000 | Grippen Park CLO, Ltd., Series 2017-1A C (3 Month LIBOR USD + 2.30%)^ | 4.77 | % | 01/20/2030 | 495,649 | |||||||
800,000 | Highbridge Loan Management, Ltd., Series 7A-2015 CR (3 Month LIBOR USD + 1.70%)^ | 4.32 | % | 03/15/2027 | 786,927 | |||||||
300,000 | Invitation Homes Trust, Series 2017-SFR2 B (1 Month LIBOR USD + 1.15%)^ | 3.58 | % | 12/19/2036 | 298,869 | |||||||
200,000 | Invitation Homes Trust, Series 2017-SFR2 C (1 Month LIBOR USD + 1.45%)^ | 3.88 | % | 12/19/2036 | 199,475 | |||||||
1,200,000 | Invitation Homes Trust, Series 2018-SFR1 C (1 Month LIBOR USD + 1.25%)^ | 3.71 | % | 03/19/2037 | 1,188,749 | |||||||
200,000 | Invitation Homes Trust, Series 2018-SFR2 C (1 Month LIBOR USD + 1.28%)^ | 3.74 | % | 06/18/2037 | 198,640 | |||||||
750,000 | Madison Park Funding XV, Ltd., Series 2014-15A A2R FLT (3 Month LIBOR USD + 1.50%)^ | 4.01 | % | 01/27/2026 | 749,930 | |||||||
750,000 | Madison Park Funding XVII, Ltd., Series 2015-17A B1R (3 Month LIBOR USD + 1.75%)^ | 4.22 | % | 07/21/2030 | 746,158 | |||||||
625,000 | Madison Park Funding XVII, Ltd., Series 2015-17A CR (3 Month LIBOR USD + 2.40%)^ | 4.87 | % | 07/22/2030 | 614,528 | |||||||
500,000 | Madison Park Funding XXI, Ltd., Series 2016-21A B (3 Month LIBOR USD + 2.75%)^ | 5.24 | % | 07/25/2029 | 501,151 | |||||||
71,354 | MVW Owner Trust, Series 2017-1A B^ | 2.75 | % | 12/20/2034 | 69,953 | |||||||
2,000,000 | Neuberger Berman Loan Advisers CLO, Ltd., Series 2017-26A A (3 Month LIBOR USD + 1.17%)^ | 3.61 | % | 10/18/2030 | 1,989,304 | |||||||
489,452 | Newtek Small Business Loan Trust, Series 2018-1 A (1 Month LIBOR USD + 1.70%)^ | 4.21 | % | 02/25/2044 | 489,787 | |||||||
750,000 | Octagon Investment Partners 25, Ltd., Series 2015-1A AR (3 Month LIBOR USD + 0.80%)^ | 3.27 | % | 10/20/2026 | 743,270 | |||||||
750,000 | Octagon Investment Partners 25, Ltd., Series 2015-1A BR (3 Month LIBOR USD + 1.20%)^ | 3.67 | % | 10/20/2026 | 730,390 | |||||||
1,000,000 | Octagon Investment Partners 30, Ltd., Series 2017-1A B (3 Month LIBOR USD + 2.35%)^ | 4.82 | % | 03/17/2030 | 971,641 | |||||||
2,000,000 | Octagon Investment Partners 36, Ltd., Series 2018-1A A1 (3 Month LIBOR USD + 0.97%)^ | 3.41 | % | 04/15/2031 | 1,966,776 | |||||||
250,000 | Oportun Funding IX LLC, Series 2018-B A^ | 3.91 | % | 07/08/2024 | 250,310 | |||||||
250,000 | Oportun Funding IX LLC, Series 2018-B B^ | 4.50 | % | 07/08/2024 | 251,896 | |||||||
325,000 | Oportun Funding VII LLC, Series 2017-B B^ | 4.26 | % | 10/10/2023 | 325,484 | |||||||
250,000 | Oportun Funding VII LLC, Series 2017-B C^ | 5.29 | % | 10/10/2023 | 250,378 | |||||||
600,000 | Oportun Funding X LLC, Series 2018-C A^ | 4.10 | % | 10/08/2024 | 606,169 | |||||||
400,000 | Oportun Funding X LLC, Series 2018-C B^ | 4.59 | % | 10/08/2024 | 405,094 | |||||||
148,963 | Orange Lake Timeshare Trust, Series 2018-A B^ | 3.35 | % | 11/08/2030 | 148,971 | |||||||
86,202 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2A^ | 2.30 | % | 05/11/2020 | 86,136 | |||||||
26,644 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2B (1 Month LIBOR USD + 0.80%)^ | 3.19 | % | 05/11/2020 | 26,657 | |||||||
97,516 | OSCAR U.S. Funding Trust VII LLC, Series 2017-2A A2B (1 Month LIBOR USD + 0.65%)^ | 3.04 | % | 11/10/2020 | 97,622 | |||||||
1,000,000 | OZLM XIII, Ltd., Series 2015-13A A2R (3 Month LIBOR USD + 1.65%)^ | 4.17 | % | 07/30/2027 | 978,403 | |||||||
652,678 | Progress Residential Trust, Series 2015-SFR2 A^ | 2.74 | % | 06/14/2032 | 644,628 | |||||||
400,894 | Progress Residential Trust, Series 2015-SFR3 A^ | 3.07 | % | 11/15/2032 | 397,419 | |||||||
500,000 | Progress Residential Trust, Series 2016-SFR2 C (1 Month LIBOR USD + 2.20%)^ | 4.66 | % | 01/20/2034 | 500,510 | |||||||
850,000 | Progress Residential Trust, Series 2018-SFR1 B^ | 3.48 | % | 03/17/2035 | 834,829 |
The accompanying notes are an integral part of these financial statements.
36
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Asset Backed Securities — 29.4% (Continued) | |||||||||||||
200,000 | Progress Residential Trust, Series 2018-SFR1 C^ | 3.68 | % | 03/17/2035 | 197,209 | ||||||||
500,000 | Progress Residential Trust, Series 2018-SFR1 A^ | 3.26 | % | 03/19/2035 | 492,156 | ||||||||
1,126,513 | Santander Drive Auto Receivables Trust, Series 2015-4 C | 2.97 | % | 03/15/2021 | 1,126,075 | ||||||||
500,000 | Santander Drive Auto Receivables Trust, Series 2017-1 D | 3.17 | % | 04/17/2023 | 498,555 | ||||||||
1,000,000 | Santander Drive Auto Receivables Trust, Series 2017-1 E^ | 5.05 | % | 07/15/2024 | 1,025,186 | ||||||||
1,669,709 | Seneca Park CLO, Ltd., Series 2014-1A AR (3 Month LIBOR USD + 1.12%)^ | 3.57 | % | 07/17/2026 | 1,666,291 | ||||||||
34,430 | Sierra Timeshare Receivables Funding LLC, Series 2015-3A A^ | 2.58 | % | 09/20/2032 | 34,125 | ||||||||
61,359 | Sierra Timeshare Receivables Funding LLC, Series 2016-2A A^ | 2.33 | % | 07/20/2033 | 59,699 | ||||||||
750,000 | Sound Point CLO XIV, Ltd., Series 2016-3A C (3 Month LIBOR USD + 2.65%)^ | 5.13 | % | 01/23/2029 | 749,938 | ||||||||
162,211 | Southwest Airlines Co., Series 2007-1 | 6.15 | % | 02/01/2024 | 170,654 | ||||||||
1,165,350 | Symphony CLO XII, Ltd., Series 2013-12A AR (3 Month LIBOR USD + 1.03%)^ | 3.47 | % | 10/15/2025 | 1,161,671 | ||||||||
1,457,337 | Symphony CLO XIV, Ltd., Series 2014-14A A1R (3 Month LIBOR USD + 1.28%)^ | 3.72 | % | 07/14/2026 | 1,457,393 | ||||||||
500,000 | Tesla Auto Lease Trust, Series 2018-B A^ | 3.71 | % | 08/20/2021 | 501,377 | ||||||||
1,250,000 | Treman Park CLO, Ltd., Series 2015-1A ARR (3 Month LIBOR USD + 1.07%)^ | 3.53 | % | 10/20/2028 | 1,246,090 | ||||||||
4,582 | U.S. Airways Pass Through Trust, Series 1999-1 A< | 8.36 | % | 07/20/2020 | 4,582 | ||||||||
184,832 | Verizon Owner Trust, Series 2016-1A A^ | 1.42 | % | 01/20/2021 | 184,159 | ||||||||
600,000 | Verizon Owner Trust, Series 2016-2A B^ | 2.15 | % | 05/20/2021 | 593,185 | ||||||||
424,000 | Verizon Owner Trust, Series 2017-1A B^ | 2.45 | % | 09/20/2021 | 420,963 | ||||||||
300,000 | Verizon Owner Trust, Series 2018-1A C^ | 3.20 | % | 09/20/2022 | 300,436 | ||||||||
750,000 | Verizon Owner Trust, Series 2018-A C | 3.55 | % | 04/20/2023 | 757,799 | ||||||||
253,600 | Westgate Resorts LLC, Series 2018-1A B^ | 3.58 | % | 12/20/2031 | 252,662 | ||||||||
338,134 | Westgate Resorts LLC, Series 2018-1A C^ | 4.10 | % | 12/20/2031 | 338,772 | ||||||||
900,000 | Westlake Automobile Receivables Trust, Series 2018-1A D^ | 3.41 | % | 05/15/2023 | 893,975 | ||||||||
1,000,000 | Westlake Automobile Receivables Trust, Series 2018-2A B^ | 3.20 | % | 01/16/2024 | 997,573 | ||||||||
375,000 | Westlake Automobile Receivables Trust, Series 2018-2A D^ | 4.00 | % | 01/16/2024 | 378,589 | ||||||||
500,000 | Westlake Automobile Receivables Trust, Series 2017-2A E^ | 4.63 | % | 07/15/2024 | 500,589 | ||||||||
Total Asset Backed Securities (Cost $53,025,710) | 52,772,762 | ||||||||||||
Corporate Bonds & Notes — 28.4% | |||||||||||||
1,655,000 | AerCap Ireland Capital DAC | 3.30 | % | 01/23/2023 | 1,574,898 | ||||||||
830,000 | AK Steel Corp. | 7.50 | % | 07/15/2023 | 827,925 | ||||||||
875,000 | Allison Transmission, Inc.^ | 4.75 | % | 10/01/2027 | 783,125 | ||||||||
1,745,000 | American Tower Corp. | 3.13 | % | 01/15/2027 | 1,582,387 | ||||||||
1,655,000 | Analog Devices, Inc. | 3.90 | % | 12/15/2025 | 1,626,564 | ||||||||
1,625,000 | Apache Corp. | 4.38 | % | 10/15/2028 | 1,520,718 | ||||||||
930,000 | AutoZone, Inc. | 3.13 | % | 04/21/2026 | 869,487 | ||||||||
870,000 | BP Capital Markets America, Inc. | 3.94 | % | 09/21/2028 | 874,025 | ||||||||
870,000 | BWX Technologies, Inc.^ | 5.38 | % | 07/15/2026 | 841,464 | ||||||||
1,655,000 | CC Holdings GS V LLC | 3.85 | % | 04/15/2023 | 1,640,529 | ||||||||
830,000 | Core & Main L.P.^ | 6.13 | % | 08/15/2025 | 734,550 | ||||||||
830,000 | Delphi Technologies PLC^ | 5.00 | % | 10/01/2025 | 699,275 | ||||||||
1,655,000 | Dollar General Corp. | 4.15 | % | 11/01/2025 | 1,654,567 | ||||||||
1,655,000 | Energy Transfer Operating L.P. (Fixed until 02/15/2023, then 3 Month LIBOR USD + 4.03%) | 6.25 | % | 05/15/2023 | 1,388,131 | ||||||||
1,655,000 | Enterprise Products Operating LLC (Fixed until 08/16/2027, then 3 Month LIBOR USD + 3.03%) | 5.25 | % | 08/16/2077 | 1,381,468 | ||||||||
1,655,000 | Express Scripts Holding Co. | 4.50 | % | 02/25/2026 | 1,679,870 | ||||||||
2,000,000 | Ferguson Finance PLC^ | 4.50 | % | 10/24/2028 | 2,001,924 | ||||||||
1,655,000 | Fidelity National Information Services, Inc. | 5.00 | % | 10/15/2025 | 1,723,961 | ||||||||
880,000 | First Quality Finance Co., Inc.^ | 5.00 | % | 07/01/2025 | 789,800 | ||||||||
830,000 | frontdoor, Inc.^ | 6.75 | % | 08/15/2026 | 790,575 | ||||||||
1,434,000 | Hasbro, Inc. | 3.50 | % | 09/15/2027 | 1,332,084 | ||||||||
1,240,000 | Healthcare Trust of America Holdings L.P. | 3.75 | % | 07/01/2027 | 1,182,773 | ||||||||
1,655,000 | Hudbay Minerals, Inc.^ | 7.25 | % | 01/15/2023 | 1,642,587 | ||||||||
1,655,000 | Keysight Technologies, Inc. | 4.55 | % | 10/30/2024 | 1,690,234 | ||||||||
1,240,000 | Kroger Co. | 3.70 | % | 08/01/2027 | 1,172,700 | ||||||||
1,720,000 | Lear Corp. | 3.80 | % | 09/15/2027 | 1,574,000 | ||||||||
830,000 | Mercer International, Inc. | 6.50 | % | 02/01/2024 | 815,475 | ||||||||
2,650,000 | MPLX L.P. | 4.80 | % | 02/15/2029 | 2,648,723 |
The accompanying notes are an integral part of these financial statements.
37
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Corporate Bonds & Notes — 28.4% (Continued) | ||||||||||||
1,805,000 | Noble Energy, Inc. | 3.85 | % | 01/15/2028 | 1,634,982 | |||||||
830,000 | Novelis Corp.^ | 6.25 | % | 08/15/2024 | 782,275 | |||||||
1,585,000 | NXP BV^ | 4.13 | % | 06/01/2021 | 1,569,150 | |||||||
822,000 | ServiceMaster Co. LLC | 7.45 | % | 08/15/2027 | 842,550 | |||||||
830,000 | SESI LLC | 7.13 | % | 12/15/2021 | 709,650 | |||||||
870,000 | Southern California Edison Co. (Fixed until 02/01/22, then 3 Month LIBOR USD + 4.20%) | 6.25 | % | 08/01/2049 | 830,850 | |||||||
1,655,000 | TechnipFMC PLC | 3.45 | % | 10/01/2022 | 1,635,038 | |||||||
830,000 | Teck Resources, Ltd.^ | 8.50 | % | 06/01/2024 | 891,212 | |||||||
1,655,000 | Verisk Analytics, Inc. | 4.00 | % | 06/15/2025 | 1,663,773 | |||||||
830,000 | Viking Cruises, Ltd.^ | 5.88 | % | 09/15/2027 | 776,050 | |||||||
1,655,000 | West Fraser Timber Co., Ltd.^ | 4.35 | % | 10/15/2024 | 1,641,966 | |||||||
875,000 | Western Gas Partners L.P. | 4.75 | % | 08/15/2028 | 834,504 | |||||||
Total Corporate Bonds & Notes (Cost $52,885,757) | 50,855,819 | |||||||||||
Mortgage Backed Securities — 23.0% | ||||||||||||
400,000 | BAMLL Commercial Mortgage Securities Trust, | |||||||||||
Series 2018-DSNY C (1 Month LIBOR USD + 1.35%)^ | 3.81 | % | 09/15/2034 | 398,762 | ||||||||
750,000 | BAMLL Commercial Mortgage Securities Trust, | |||||||||||
Series 2018-DSNY D (1 Month LIBOR USD + 1.70%)^ | 4.16 | % | 09/15/2034 | 749,258 | ||||||||
400,000 | BBCMS Mortgage Trust, Series 2018-TALL C (1 Month LIBOR USD + 1.12%)^ | 3.58 | % | 03/16/2037 | 390,863 | |||||||
499,255 | BX Commercial Mortgage Trust, Series 2018-IND B (1 Month LIBOR USD + 0.90%)^ | 3.36 | % | 11/15/2035 | 495,785 | |||||||
499,255 | BX Commercial Mortgage Trust, Series 2018-IND D (1 Month LIBOR USD + 1.30%)^ | 3.76 | % | 11/15/2035 | 494,258 | |||||||
200,425 | FHLMC PC, Pool# G6-1330 | 6.00 | % | 07/01/2040 | 218,503 | |||||||
2,218,933 | FHLMC REMIC, Series 4094 NI~ | 2.50 | % | 03/15/2027 | 138,356 | |||||||
804,124 | FHLMC REMIC, Series 4107 LI~ | 3.00 | % | 08/15/2027 | 148,239 | |||||||
1,597,733 | FHLMC REMIC, Series 4143 IA~ | 3.50 | % | 09/15/2042 | 184,016 | |||||||
275,000 | FHLMC SCRTT, Series 2016-1 M1#^ | 3.00 | % | 09/25/2055 | 266,487 | |||||||
357,233 | FHMS, Series K-J13 A1 | 2.06 | % | 09/25/2021 | 354,461 | |||||||
15,801,547 | FHMS, Series K-016 X1#~ | 1.49 | % | 10/25/2021 | 554,230 | |||||||
346,957 | FHMS, Series K-J18 A1 | 2.46 | % | 03/25/2022 | 344,299 | |||||||
241,846 | FHMS, Series K-J16 A1 | 1.97 | % | 04/25/2022 | 237,640 | |||||||
107,302 | FHMS, Series K-J09 A1 | 2.02 | % | 04/25/2022 | 105,786 | |||||||
4,179,117 | FHMS, Series K-021 X1#~ | 1.44 | % | 06/25/2022 | 175,362 | |||||||
2,001,634 | FHMS, Series K-721 X1#~ | 0.33 | % | 08/25/2022 | 20,501 | |||||||
219,823 | FHMS, Series K-J07 A1 | 1.53 | % | 09/25/2022 | 214,737 | |||||||
10,312,381 | FHMS, Series K-C02 X1#~ | 0.37 | % | 03/25/2024 | 190,279 | |||||||
1,700,000 | FHMS, Series K-728 A2# | 3.06 | % | 08/25/2024 | 1,706,740 | |||||||
709,687 | FHMS, Series K-J17 A1 | 2.40 | % | 10/25/2024 | 701,898 | |||||||
1,558,303 | FHMS, Series K-055 X1#~ | 1.37 | % | 03/25/2026 | 127,899 | |||||||
695,973 | FHMS, Series K-057 X1#~ | 1.19 | % | 07/25/2026 | 51,248 | |||||||
676,999 | FHMS, Series K-058 X1#~ | 0.93 | % | 08/25/2026 | 39,893 | |||||||
1,390,823 | FHMS, Series K-W03 X1#~ | 0.85 | % | 06/25/2027 | 74,820 | |||||||
783,763 | FHMS, Series Q-006 APT1# | 2.58 | % | 04/25/2028 | 828,697 | |||||||
792,623 | FHMS, Series Q-004 A2H# | 2.87 | % | 01/25/2046 | 792,685 | |||||||
744,250 | FNMA, Pool# BM3352 | 2.55 | % | 12/01/2026 | 718,624 | |||||||
500,000 | FNMA, Pool# AN6558 | 2.91 | % | 09/01/2027 | 483,965 | |||||||
544,470 | FNMA, Pool# AM3724 | 3.08 | % | 06/01/2028 | 537,491 | |||||||
485,000 | FNMA, Pool# AN2738 | 2.39 | % | 09/01/2028 | 453,085 | |||||||
363,561 | FNMA, Pool# AM8082 | 2.92 | % | 02/01/2030 | 351,969 | |||||||
1,485,386 | FNMA, Pool# AS2249 | 4.00 | % | 04/01/2039 | 1,528,010 | |||||||
271,582 | FNMA, Pool# 467095 | 5.90 | % | 01/01/2041 | 310,954 | |||||||
676,758 | FNMA, Pool# BM4143 | 6.00 | % | 07/01/2041 | 738,860 | |||||||
180,152 | FNMA, Pool# 469130 | 4.87 | % | 10/01/2041 | 193,060 | |||||||
850,304 | FNMA, Pool# AB9349 | 3.00 | % | 05/01/2043 | 835,771 | |||||||
461,312 | FNMA, Pool# AU6230 | 5.00 | % | 09/01/2043 | 488,548 | |||||||
1,077,834 | FNMA, Pool# BD4016 | 4.00 | % | 07/01/2047 | 1,116,606 | |||||||
393,548 | FNMA, Pool# BD4041 | 4.00 | % | 11/01/2047 | 404,234 |
The accompanying notes are an integral part of these financial statements.
38
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 23.0% (Continued) | ||||||||||||
393,866 | FNMA, Pool# BH7686 | 4.50 | % | 12/01/2047 | 408,338 | |||||||
1,128,217 | FNMA, Pool# BJ4049 | 4.00 | % | 05/01/2048 | 1,156,790 | |||||||
198,427 | FNMA, Pool# BJ4050 | 4.50 | % | 05/01/2048 | 207,948 | |||||||
198,473 | FNMA, Pool# BJ4052 | 4.50 | % | 05/01/2048 | 207,557 | |||||||
297,223 | FNMA, Pool# BJ4051 | 4.50 | % | 05/01/2048 | 311,659 | |||||||
198,591 | FNMA, Pool# BK5105 | 5.50 | % | 05/01/2048 | 212,507 | |||||||
297,831 | FNMA, Pool# BJ4057 | 4.50 | % | 06/01/2048 | 310,002 | |||||||
198,907 | FNMA, Pool# BK8032 | 5.50 | % | 06/01/2048 | 212,845 | |||||||
248,488 | FNMA, Pool# BJ4060 | 4.50 | % | 07/01/2048 | 260,579 | |||||||
248,591 | FNMA, Pool# BJ4061 | 4.50 | % | 07/01/2048 | 260,745 | |||||||
247,575 | FNMA, Pool# BJ4062 | 4.50 | % | 07/01/2048 | 257,961 | |||||||
746,718 | FNMA, Pool# BJ4067 | 4.50 | % | 08/01/2048 | 779,310 | |||||||
896,844 | FNMA, Pool# BJ4070 | 4.00 | % | 09/01/2048 | 920,661 | |||||||
508,224 | FNMA, Pool# BJ4073 | 4.50 | % | 09/01/2048 | 532,606 | |||||||
468,106 | FNMA, Pool# BJ4072 | 4.50 | % | 09/01/2048 | 490,996 | |||||||
428,741 | FNMA, Pool# BJ4075 | 5.00 | % | 09/01/2048 | 457,056 | |||||||
199,227 | FNMA, Pool# BN0202 | 5.50 | % | 09/01/2048 | 213,188 | |||||||
588,736 | FNMA, Pool# BJ4082 | 5.00 | % | 11/01/2048 | 629,165 | |||||||
99,875 | FNMA REMIC Trust, Series 2017-T1 A | 2.90 | % | 06/25/2027 | 95,570 | |||||||
923,000 | FNMA REMIC Trust, Series 2017-M13 A2# | 2.94 | % | 09/25/2027 | 898,532 | |||||||
750,000 | FNMA REMIC Trust, Series 2018-M8 A2# | 3.33 | % | 06/25/2028 | 747,992 | |||||||
495,601 | FNMA REMIC Trust, Series 2018-M3 A1# | 2.99 | % | 02/25/2030 | 493,880 | |||||||
749,195 | FNMA REMIC Trust, Series 2018-M13 A1# | 3.82 | % | 09/25/2030 | 790,359 | |||||||
648,449 | FNMA REMIC Trust, Series 2012-65 HJ | 5.00 | % | 07/25/2040 | 702,782 | |||||||
2,000,000 | FNMA, 3.0%, Due TBA January | 3.00 | % | 01/15/2033 | 1,995,195 | |||||||
1,500,000 | FNMA, 3.5%, Due TBA January | 3.50 | % | 01/15/2033 | 1,518,135 | |||||||
1,000,000 | FNMA, 4.5%, Due TBA January | 4.50 | % | 01/15/2048 | 1,035,645 | |||||||
1,000,000 | FNMA, 5.0%, Due TBA January | 5.00 | % | 01/15/2048 | 1,047,578 | |||||||
650,000 | FREMF Mortgage Trust, Series 2017-K729 B#^ | 3.67 | % | 11/25/2024 | 641,393 | |||||||
707,348 | GNMA REMIC Trust, Series 2006-47 ZA | 5.00 | % | 08/16/2036 | 754,972 | |||||||
1,095,213 | GNMA REMIC Trust, Series 2014-45 B1#~ | 0.75 | % | 07/16/2054 | 50,053 | |||||||
954,261 | GNMA REMIC Trust, Series 2014-135 I0#~ | 0.82 | % | 01/16/2056 | 49,764 | |||||||
943,696 | GNMA REMIC Trust, Series 2015-172 I0#~ | 0.90 | % | 03/16/2057 | 58,319 | |||||||
1,280,254 | GNMA REMIC Trust, Series 2016-40 I0#~ | 0.77 | % | 07/16/2057 | 71,438 | |||||||
1,042,989 | GNMA REMIC Trust, Series 2016-56 I0#~ | 0.97 | % | 11/16/2057 | 72,878 | |||||||
1,270,084 | GNMA REMIC Trust, Series 2016-98 I0#~ | 0.95 | % | 05/16/2058 | 93,588 | |||||||
500,000 | GSMS, Series 2018-FBLU C (1 Month LIBOR USD + 1.60%)^ | 4.06 | % | 11/15/2035 | 497,011 | |||||||
1,250,000 | GSMS, Series 2018-FBLU D (1 Month LIBOR USD + 2.00%)^ | 4.46 | % | 11/15/2035 | 1,236,727 | |||||||
385,000 | MAD Mortgage Trust, Series 2017-330M B#^ | 3.37 | % | 08/17/2034 | 379,611 | |||||||
275,000 | MSC, Series 2017-CLS C (1 Month LIBOR USD + 1.00%)^ | 3.46 | % | 11/15/2034 | 271,166 | |||||||
175,000 | MSC, Series 2017-CLS D (1 Month LIBOR USD + 1.40%)^ | 3.86 | % | 11/15/2034 | 172,716 | |||||||
500,000 | Velocity Commercial Capital Loan Trust, Series 2016-2 M1# | 3.66 | % | 10/25/2046 | 502,771 | |||||||
500,000 | Velocity Commercial Capital Loan Trust, Series 2017-1 M1#^ | 3.55 | % | 05/25/2047 | 489,321 | |||||||
482,863 | Velocity Commercial Capital Loan Trust, Series 2018-2 A#^ | 4.05 | % | 10/25/2048 | 487,331 | |||||||
Total Mortgage Backed Securities (Cost $41,107,466) | 41,151,519 | |||||||||||
U.S. Treasury Notes — 10.1% | ||||||||||||
9,100,000 | United States Treasury Note | 1.88 | % | 12/15/2020 | 8,993,537 | |||||||
9,100,000 | United States Treasury Note | 2.38 | % | 03/15/2021 | 9,077,783 | |||||||
Total U.S. Treasury Notes (Cost $18,011,916) | 18,071,320 | |||||||||||
Municipal Bonds — 3.8% | ||||||||||||
230,000 | American Municipal Power, Inc. | 6.05 | % | 02/15/2043 | 289,533 | |||||||
350,000 | District of Columbia# | 6.55 | % | 08/01/2038 | 350,000 | |||||||
2,000,000 | District of Columbia# | 6.71 | % | 08/01/2038 | 2,000,000 | |||||||
1,200,000 | Health Care Authority for Baptist Health | 5.50 | % | 11/15/2043 | 1,303,032 | |||||||
750,000 | Massachusetts Port Authority# | 4.99 | % | 01/01/2031 | 750,000 |
The accompanying notes are an integral part of these financial statements.
39
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Municipal Bonds — 3.8% (Continued) | |||||||||||||
1,300,000 | Mosaic District Community Development Authority | 7.25 | % | 03/01/2036 | 1,369,979 | ||||||||
800,000 | North Texas Tollway Authority | 8.91 | % | 02/01/2030 | 846,416 | ||||||||
Total Municipal Bonds (Cost $6,731,118) | 6,908,960 | ||||||||||||
Preferred Stocks — 0.4% | |||||||||||||
14,625 | AGNC Investment Corp., Series B, 7.75% | 370,890 | |||||||||||
2,076 | AGNC Investment Corp., Series C, 7.00% | ||||||||||||
(Fixed until 10/15/2022, then 3 Month LIBOR USD + 5.11%) | 52,481 | ||||||||||||
10,000 | Annaly Capital Management, Inc., Series G, 6.50% | ||||||||||||
(Fixed until 03/31/2023, then 3 Month LIBOR USD + 4.17%) | 232,300 | ||||||||||||
Total Preferred Stocks (Cost $664,114) | 655,671 | ||||||||||||
Short-Term Investments — 5.4% | |||||||||||||
Money Market Funds — 5.1% | |||||||||||||
9,078,460 | First American Government Obligations Fund — Class Z, 2.32%* | 9,078,460 | |||||||||||
U.S. Treasury Bills — 0.3% | |||||||||||||
610,000 | United States Treasury Bill† | 608,842 | |||||||||||
Total Short-Term Investments (Cost $9,687,302) | 9,687,302 | ||||||||||||
Total Investments — 100.5% (Cost $182,113,383) | 180,103,353 | ||||||||||||
Liabilities in Excess of Other Assets — (0.5)% | (909,802 | ) | |||||||||||
NET ASSETS — 100.0% | $ | 179,193,551 |
# | Variable rate security. Rate disclosed is as of December 31, 2018. |
^ | 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, 2018, the value of these securities amounted to $64,790,363 or 36.2% of net assets. |
< | This security is being fair valued, using significant unobservable inputs (Level 3), under the supervision of the Board of Trustees. |
~ | Interest Only Security |
† | This security is pledged as collateral in connection with open futures contracts. |
* | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Asset Backed Securities | 29.4% |
Corporate Bonds & Notes | 28.4% |
Mortgage Backed Securities | 23.0% |
U.S. Treasury Notes | 10.1% |
Money Market Funds | 5.1% |
Municipal Bonds | 3.8% |
Preferred Stocks | 0.4% |
U.S. Treasury Bills | 0.3% |
Other Assets and Liabilities | (0.5)% |
100.0% |
Futures Contracts — Long (Note 6)
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury Long Bond Futures | 56 | 03/20/2019 | $ | 7,852,988 | $ | 8,176,000 | $ | 323,012 | |||||||||
U.S. Treasury 10-Year Ultra Futures | 107 | 03/20/2019 | 13,610,182 | 13,918,359 | 308,177 | ||||||||||||
U.S. Treasury Ultra Bond Futures | 128 | 03/20/2019 | 19,554,113 | 20,564,000 | 1,009,887 | ||||||||||||
$ | 41,017,283 | $ | 42,658,359 | $ | 1,641,076 | ||||||||||||
Futures Contracts — Short (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury 10-Year Note Futures | (55) | 03/20/2019 | $ | (6,554,620 | ) | $ | (6,710,859 | ) | $ | (156,239 | ) |
There is no variation margin due to or from the Fund as of December 31, 2018.
The accompanying notes are an integral part of these financial statements.
40
Brown Advisory Strategic Bond Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
The Brown Advisory Strategic Bond Fund – Investor Shares (the “Fund”) gained 0.17% in the six months ended December 31, 2018, underperforming the 1.91% return for the Fund’s benchmark, the Bloomberg Barclays Intermediate US Aggregate Bond Index (the “Index”). A market-driven decline in value in the three months ending in December offset most of the gain realized in the three months ending in September.
The Fund’s strategy is founded upon deep credit research that in turn feeds our proprietary, factor-based risk pricing models. We believe that this process helps us to consistently identify individual securities offering the best risk-adjusted return. We analyze investment ideas using rigorous underwriting standards and fundamental analysis to identify, assess, and price a bond’s risks. We believe that our methodology allows us to compare the expected return of bonds across multiple sectors, using our due diligence process to adjust for both impairment risk and interest rate risk, thereby driving our capital allocation decisions from the bottom-up. We seek to mitigate idiosyncratic risks by strictly applying a sizing model focused on a bond’s estimated downside.
The Fund attempts to mitigate duration risk and has been operating with a duration less than half that of our stated benchmark. As such, we have managed the Fund with a duration of just under 2.0 over the past six months. As we have previously stated, we are not attempting to generate meaningful alpha by making a bet on the direction of interest rates. Instead, we aim for low sensitivity to interest rates by buying shorter-dated bonds, using hedges such as Treasury futures, and by purchasing floating-rate instruments. Floating-rate debt represented over 35% of fund assets at period-end.
The Fund’s gain came despite a market selloff in corporate credit, which began in October and accelerated through November and December. At the beginning of the period, the Fund was positioned with a relatively low weighting to corporate high yield of approximately 17%. This is roughly half of what we consider to be the Fund’s neutral weighting, and well below our self-imposed maximum allocation of 50%. The Fund’s relatively high quality weighting and its yield helped offset the mark-to-market declines of our corporate and CLO holdings that accelerated in December as the overall equity and credit markets came under pressure. We added selectively to corporate bonds at the very end of the period where we believed that downside scenarios were being abundantly priced into the yields. As such, the Fund ended the period with a slightly higher weighting to high yield corporate holdings of 18.6% and an increase of almost 2% of our split investment-grade corporate holdings to 3.6%.
Structured products continue comprising the majority of our holdings, but the composition thereof has changed slightly. We slightly reduced our holdings of CLOs throughout the end of last fiscal year and the beginning of this one, based on our view of relative value. We allowed many of our holdings to be refinanced and only replaced where we could with shorter-tenor, higher-quality, and higher-coupon paper. This increased the quality of our holdings and reduced the volatility, which served us well heading into November. Our CLOs posted a modestly positive return during the fourth quarter as a result. The net reduction in our allocation to CLOs was funded by an increase in our allocation to asset-backed securities (ABS), which returned over 2% in the period and comprised roughly 20% of the Fund. CMBS, at 6% of the Fund, returned just over 2% as well. We continue to believe that structured products are instrumental in helping us improve the overall credit quality of the portfolio, enhance returns, reduce duration, and provide diversification. The Fund continues taking advantage of pockets of value in certain municipal bond securities, although many were called away during the period and our exposure fell in half to roughly 3.5%. Municipal bonds were again our best-performers.
Our process seeks to facilitate consistently better decision-making, grounded in our core tenets and our ability to price risk based on an investment’s cash flow profile, liquidity, structural terms, and enterprise value coverage. We believe that adhering to this process gives the Fund the potential to continue adding value whether credit is widening or tightening, and could be a key driver of performance through market and business cycles.
Sincerely,
Robert H. Snyder
Co-Portfolio Manager
Thomas D.D. Graff, CFA
Co-Portfolio Manager
41
Brown Advisory Strategic Bond Fund
A Message to Our Shareholders
December 31, 2018
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, a non-diversified fund is more exposed to individual stock volatility than a diversified fund. The fund may make short sales of securities, which involve the risk that losses in a security may exceed the original amount invested in that security. The risks of investments in derivatives, including options on futures contracts and options on futures contracts include imperfect correlation between the value of these instruments and the underlying assets; risks of default by the other party to the derivative transactions; risks that the transactions may result in losses that partially or completely offset gains in portfolio positions; and risks that the derivative transactions may not be liquid. Income from tax-exempt securities may be subject to state and local taxes and a portion of income may be subject to the federal alternative minimum tax for certain investors.
Diversification does not assure a profit or protect against loss in a declining market.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
Credit Quality weights by rating are derived from the highest bond rating as determined by Standard & Poor’s (“S&P”), Moody’s or Fitch. Bond ratings are grades given to bonds that indicate their credit quality as determined by private independent rating services such as S&P, Moody’s and Fitch. These firms evaluate 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 none of the three rating agencies have issued a formal rating, the Advisor will classify the security as nonrated.
42
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Asset Backed Securities — 43.3% | ||||||||||||
350,000 | American Credit Acceptance Receivables Trust, Series 2017-3 C^ | 2.72 | % | 06/10/2022 | 348,994 | |||||||
650,000 | American Credit Acceptance Receivables Trust, Series 2017-4 C^ | 2.94 | % | 01/10/2024 | 647,212 | |||||||
1,000,000 | AmeriCredit Automobile Receivables Trust, Series 2016-2 C | 2.87 | % | 11/08/2021 | 997,532 | |||||||
1,000,000 | AmeriCredit Automobile Receivables Trust, Series 2016-2 D | 3.65 | % | 05/09/2022 | 1,008,504 | |||||||
200,000 | AmeriCredit Automobile Receivables Trust, Series 2016-3 D | 2.71 | % | 09/08/2022 | 197,611 | |||||||
225,000 | AmeriCredit Automobile Receivables Trust, Series 2017-3 D | 3.18 | % | 07/18/2023 | 223,075 | |||||||
275,000 | AmeriCredit Automobile Receivables Trust, Series 2017-4 D | 3.08 | % | 12/18/2023 | 271,457 | |||||||
221,039 | BRE Grand Islander Timeshare Issuer LLC, Series 2017-1A A^ | 2.94 | % | 05/25/2029 | 218,356 | |||||||
750,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2015-1A CR (3 Month LIBOR USD + 2.00%)^ | 4.47 | % | 04/20/2027 | 738,866 | |||||||
1,000,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2015-2A CR (3 Month LIBOR USD + 2.25%)^ | 4.76 | % | 04/27/2027 | 938,699 | |||||||
2,000,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2013-4A A1RR (3 Month LIBOR USD + 1.00%)^ | 3.44 | % | 01/15/2031 | 1,970,334 | |||||||
2,000,000 | Carlyle U.S. CLO, Ltd., Series 2017-2A A1B (3 Month LIBOR USD + 1.22%)^ | 3.69 | % | 07/21/2031 | 1,979,066 | |||||||
1,000,000 | CBAM, Ltd., Series 2017-1A B (3 Month LIBOR USD + 1.80%)^ | 4.27 | % | 07/20/2030 | 968,372 | |||||||
799,043 | Colony Starwood Homes Trust, Series 2016-2A A (1 Month LIBOR USD + 1.25%)^ | 3.71 | % | 12/19/2033 | 801,296 | |||||||
103,319 | Continental Airlines Trust, Series 1999-1 A | 6.55 | % | 08/02/2020 | 103,584 | |||||||
235,000 | CPS Auto Receivables Trust, Series 2015-C D^ | 4.63 | % | 08/16/2021 | 237,987 | |||||||
300,000 | CPS Auto Receivables Trust, Series 2016-C E^ | 8.39 | % | 09/15/2023 | 316,720 | |||||||
1,250,000 | Dell Equipment Finance Trust, Series 2017-2 B^ | 2.47 | % | 10/24/2022 | 1,239,236 | |||||||
750,000 | Dell Equipment Finance Trust, Series 2018-2 D^ | 3.97 | % | 10/22/2024 | 762,063 | |||||||
1,149,429 | Drive Auto Receivables Trust, Series 2017-BA C^ | 2.61 | % | 08/16/2021 | 1,149,050 | |||||||
720,000 | Drive Auto Receivables Trust, Series 2018-1 C | 3.22 | % | 03/15/2023 | 718,743 | |||||||
750,000 | Drive Auto Receivables Trust, Series 2017-2 C | 2.75 | % | 09/15/2023 | 748,571 | |||||||
1,000,000 | Drive Auto Receivables Trust, Series 2017-3 D^ | 3.53 | % | 12/15/2023 | 1,001,229 | |||||||
1,500,000 | Drive Auto Receivables Trust, Series 2018-1 D | 3.81 | % | 05/15/2024 | 1,503,271 | |||||||
725,000 | Drive Auto Receivables Trust, Series 2018-2 D | 4.14 | % | 08/15/2024 | 731,325 | |||||||
700,000 | Drive Auto Receivables Trust, Series 2018-3 D | 4.30 | % | 09/16/2024 | 710,321 | |||||||
1,970,315 | DT Auto Owner Trust, Series 2016-1A D^ | 4.66 | % | 12/15/2022 | 1,981,877 | |||||||
500,000 | DT Auto Owner Trust, Series 2017-4A C^ | 2.86 | % | 07/17/2023 | 498,659 | |||||||
900,000 | DT Auto Owner Trust, Series 2017-4A D^ | 3.47 | % | 07/17/2023 | 897,652 | |||||||
750,000 | DT Auto Owner Trust, Series 2018-1A C^ | 3.47 | % | 12/15/2023 | 752,042 | |||||||
500,000 | DT Auto Owner Trust, Series 2018-2A C^ | 3.67 | % | 03/15/2024 | 502,576 | |||||||
1,000,000 | DT Auto Owner Trust, Series 2018-3A D^ | 4.19 | % | 07/15/2024 | 1,005,885 | |||||||
400,000 | DT Auto Owner Trust, Series 2017-3A E^ | 5.60 | % | 08/15/2024 | 409,601 | |||||||
383,331 | Federal Express Corp., Series 1998-1 | 6.72 | % | 07/15/2023 | 401,160 | |||||||
1,000,000 | GoldenTree Loan Management CLO, Ltd., Series 2017-1A C (3 Month LIBOR USD + 2.20%)^ | 4.67 | % | 04/20/2029 | 970,332 | |||||||
2,000,000 | GoldenTree Loan Opportunities XI, Ltd., | |||||||||||
Series 2015-11A AR2 FLT (3 Month LIBOR USD + 1.07%)^ | 3.51 | % | 01/21/2031 | 1,965,782 | ||||||||
300,000 | GreatAmerica Leasing Receivables Funding LLC, Series 2018-1 C^ | 3.14 | % | 06/16/2025 | 294,383 | |||||||
1,000,000 | Grippen Park CLO, Ltd., Series 2017-1A C (3 Month LIBOR USD + 2.30%)^ | 4.77 | % | 01/20/2030 | 991,298 | |||||||
1,975,000 | Highbridge Loan Management, Ltd., Series 2013-2A A2R (3 Month LIBOR USD + 1.63%)^ | 4.09 | % | 10/20/2029 | 1,935,482 | |||||||
300,000 | Invitation Homes Trust, Series 2017-SFR2 B (1 Month LIBOR USD + 1.15%)^ | 3.58 | % | 12/19/2036 | 298,868 | |||||||
200,000 | Invitation Homes Trust, Series 2017-SFR2 C (1 Month LIBOR USD + 1.45%)^ | 3.88 | % | 12/19/2036 | 199,475 | |||||||
1,200,000 | Invitation Homes Trust, Series 2018-SFR1 C (1 Month LIBOR USD + 1.25%)^ | 3.71 | % | 03/19/2037 | 1,188,749 | |||||||
200,000 | Invitation Homes Trust, Series 2018-SFR2 C (1 Month LIBOR USD + 1.28%)^ | 3.74 | % | 06/18/2037 | 198,640 | |||||||
930,000 | LCM XXV, Ltd., Series 2017-25A C2 (3 Month LIBOR USD + 2.30%)^ | 4.77 | % | 07/22/2030 | 907,920 | |||||||
750,000 | Madison Park Funding XV, Ltd., Series 2014-15A A2R FLT (3 Month LIBOR USD + 1.50%)^ | 4.01 | % | 01/27/2026 | 749,930 | |||||||
750,000 | Madison Park Funding XVII, Ltd., Series 2015-17A B1R (3 Month LIBOR USD + 1.75%)^ | 4.22 | % | 07/21/2030 | 746,158 | |||||||
700,000 | Madison Park Funding XVII, Ltd., Series 2015-17A CR (3 Month LIBOR USD + 2.40%)^ | 4.87 | % | 07/22/2030 | 688,271 | |||||||
500,000 | Madison Park Funding XXI, Ltd., Series 2016-21A B (3 Month LIBOR USD + 2.75%)^ | 5.24 | % | 07/25/2029 | 501,151 | |||||||
1,000,000 | Madison Park Funding XXV, Ltd., Series 2017-25A B (3 Month LIBOR USD + 2.35%)^ | 4.84 | % | 04/25/2029 | 980,829 | |||||||
1,000,000 | Magnetite IX, Ltd., Series 2014-9A BR (3 Month LIBOR USD + 2.00%)^ | 4.49 | % | 07/25/2026 | 989,425 | |||||||
750,000 | Magnetite IX, Ltd., Series 2014-9A CR (3 Month LIBOR USD + 3.10%)^ | 5.59 | % | 07/25/2026 | 754,914 | |||||||
71,354 | MVW Owner Trust, Series 2017-1A B^ | 2.75 | % | 12/20/2034 | 69,953 | |||||||
2,000,000 | Neuberger Berman Loan Advisers CLO, Ltd., Series 2017-26A A (3 Month LIBOR USD + 1.17%)^ | 3.61 | % | 10/18/2030 | 1,989,304 | |||||||
489,452 | Newtek Small Business Loan Trust, Series 2018-1 A (1 Month LIBOR USD + 1.70%)^ | 4.21 | % | 02/25/2044 | 489,787 | |||||||
1,000,000 | Octagon Investment Partners 24, Ltd., Series 2015-1A A2AR FLT (3 Month LIBOR USD + 1.35%)^ | 4.00 | % | 05/21/2027 | 982,931 |
The accompanying notes are an integral part of these financial statements.
43
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Asset Backed Securities — 43.3% (Continued) | ||||||||||||
750,000 | Octagon Investment Partners 25, Ltd., Series 2015-1A AR (3 Month LIBOR USD + 0.80%)^ | 3.27 | % | 10/20/2026 | 743,270 | |||||||
750,000 | Octagon Investment Partners 25, Ltd., Series 2015-1A BR (3 Month LIBOR USD + 1.20%)^ | 3.67 | % | 10/20/2026 | 730,390 | |||||||
1,000,000 | Octagon Investment Partners 30, Ltd., Series 2017-1A B (3 Month LIBOR USD + 2.35%)^ | 4.82 | % | 03/17/2030 | 971,641 | |||||||
2,000,000 | Octagon Investment Partners 36, Ltd., Series 2018-1A A1 (3 Month LIBOR USD + 0.97%)^ | 3.41 | % | 04/15/2031 | 1,966,776 | |||||||
1,000,000 | Octagon Investment Partners XIV, Ltd., Series 2012-1A CR (3 Month LIBOR USD + 4.00%)^ | 6.44 | % | 07/16/2029 | 997,844 | |||||||
500,000 | Octagon Investment Partners XIX, Ltd., Series 2014-1A CR (3 Month LIBOR USD + 2.10%)^ | 4.54 | % | 04/15/2026 | 496,428 | |||||||
300,000 | Oportun Funding IX LLC, Series 2018-B A^ | 3.91 | % | 07/08/2024 | 300,372 | |||||||
250,000 | Oportun Funding IX LLC, Series 2018-B B^ | 4.50 | % | 07/08/2024 | 251,896 | |||||||
325,000 | Oportun Funding VII LLC, Series 2017-B B^ | 4.26 | % | 10/10/2023 | 325,484 | |||||||
250,000 | Oportun Funding VII LLC, Series 2017-B C^ | 5.29 | % | 10/10/2023 | 250,377 | |||||||
600,000 | Oportun Funding X LLC, Series 2018-C A^ | 4.10 | % | 10/08/2024 | 606,169 | |||||||
400,000 | Oportun Funding X LLC, Series 2018-C B^ | 4.59 | % | 10/08/2024 | 405,094 | |||||||
148,963 | Orange Lake Timeshare Trust, Series 2018-A B^ | 3.35 | % | 11/08/2030 | 148,971 | |||||||
321,297 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2A^ | 2.30 | % | 05/11/2020 | 321,053 | |||||||
26,644 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2B (1 Month LIBOR USD + 0.80%)^ | 3.19 | % | 05/11/2020 | 26,657 | |||||||
97,516 | OSCAR U.S. Funding Trust VII LLC, Series 2017-2A A2B (1 Month LIBOR USD + 0.65%)^ | 3.04 | % | 11/10/2020 | 97,622 | |||||||
260,000 | OSCAR U.S. Funding Trust VII LLC, Series 2017-2A A3^ | 2.45 | % | 12/10/2021 | 257,531 | |||||||
584,355 | OSCAR U.S. Funding Trust VIII LLC, Series 2018-1A A2B (1 Month LIBOR USD + 0.49%)^ | 2.88 | % | 04/12/2021 | 584,891 | |||||||
1,000,000 | OZLM XIII, Ltd., Series 2015-13A A2R (3 Month LIBOR USD + 1.65%)^ | 4.17 | % | 07/30/2027 | 978,403 | |||||||
653,661 | Progress Residential Trust, Series 2015-SFR2 A^ | 2.74 | % | 06/14/2032 | 645,599 | |||||||
401,884 | Progress Residential Trust, Series 2015-SFR3 A^ | 3.07 | % | 11/15/2032 | 398,400 | |||||||
500,000 | Progress Residential Trust, Series 2016-SFR2 C (1 Month LIBOR USD + 2.20%)^ | 4.66 | % | 01/20/2034 | 500,510 | |||||||
850,000 | Progress Residential Trust, Series 2018-SFR1 B^ | 3.48 | % | 03/17/2035 | 834,829 | |||||||
200,000 | Progress Residential Trust, Series 2018-SFR1 C^ | 3.68 | % | 03/17/2035 | 197,209 | |||||||
500,000 | Progress Residential Trust, Series 2018-SFR1 A^ | 3.26 | % | 03/19/2035 | 492,156 | |||||||
1,000,000 | Regatta Funding L.P., Series 2013-2A BR (3 Month LIBOR USD + 2.90%)^ | 5.34 | % | 01/15/2029 | 1,000,046 | |||||||
1,125,000 | Santander Drive Auto Receivables Trust, Series 2016-3 C | 2.46 | % | 03/15/2022 | 1,117,687 | |||||||
500,000 | Santander Drive Auto Receivables Trust, Series 2017-1 D | 3.17 | % | 04/17/2023 | 498,555 | |||||||
150,000 | Santander Drive Auto Receivables Trust, Series 2017-2 D | 3.49 | % | 07/17/2023 | 149,290 | |||||||
325,000 | Santander Drive Auto Receivables Trust, Series 2017-3 D | 3.20 | % | 11/15/2023 | 323,783 | |||||||
600,000 | Santander Drive Auto Receivables Trust, Series 2017-1 E^ | 5.05 | % | 07/15/2024 | 615,112 | |||||||
1,718,043 | Seneca Park CLO, Ltd., Series 2014-1A AR (3 Month LIBOR USD + 1.12%)^ | 3.57 | % | 07/17/2026 | 1,714,526 | |||||||
34,430 | Sierra Timeshare Receivables Funding LLC, Series 2015-3A A^ | 2.58 | % | 09/20/2032 | 34,125 | |||||||
30,680 | Sierra Timeshare Receivables Funding LLC, Series 2016-2A A^ | 2.33 | % | 07/20/2033 | 29,849 | |||||||
750,000 | Sound Point CLO XIV, Ltd., Series 2016-3A C (3 Month LIBOR USD + 2.65%)^ | 5.13 | % | 01/23/2029 | 749,938 | |||||||
229,544 | Southwest Airlines Co., Series 2007-1 | 6.15 | % | 02/01/2024 | 241,492 | |||||||
1,457,337 | Symphony CLO XIV, Ltd., Series 2014-14A A1R (3 Month LIBOR USD + 1.28%)^ | 3.72 | % | 07/14/2026 | 1,457,392 | |||||||
500,000 | Tesla Auto Lease Trust, Series 2018-B A^ | 3.71 | % | 08/20/2021 | 501,377 | |||||||
2,000,000 | Treman Park CLO, Ltd., Series 2015-1A ARR (3 Month LIBOR USD + 1.07%)^ | 3.53 | % | 10/20/2028 | 1,993,744 | |||||||
4,582 | U.S. Airways Pass Through Trust, Series 1999-1 A< | 8.36 | % | 07/20/2020 | 4,582 | |||||||
184,832 | Verizon Owner Trust, Series 2016-1A A^ | 1.42 | % | 01/20/2021 | 184,159 | |||||||
750,000 | Verizon Owner Trust, Series 2016-2A B^ | 2.15 | % | 05/20/2021 | 741,481 | |||||||
1,000,000 | Verizon Owner Trust, Series 2017-1A A^ | 2.06 | % | 09/20/2021 | 992,703 | |||||||
400,000 | Verizon Owner Trust, Series 2017-1A B^ | 2.45 | % | 09/20/2021 | 397,135 | |||||||
700,000 | Verizon Owner Trust, Series 2017-2A A^ | 1.92 | % | 12/20/2021 | 692,973 | |||||||
400,000 | Verizon Owner Trust, Series 2018-1A C^ | 3.20 | % | 09/20/2022 | 400,581 | |||||||
750,000 | Verizon Owner Trust, Series 2018-A C | 3.55 | % | 04/20/2023 | 757,799 | |||||||
1,500,000 | Voya CLO, Ltd., Series 2013-1A A2R (3 Month LIBOR USD + 1.55%)^ | 3.99 | % | 10/15/2030 | 1,464,069 | |||||||
253,600 | Westgate Resorts LLC, Series 2018-1A B^ | 3.58 | % | 12/20/2031 | 252,662 | |||||||
338,134 | Westgate Resorts LLC, Series 2018-1A C^ | 4.10 | % | 12/20/2031 | 338,772 | |||||||
700,000 | Westlake Automobile Receivables Trust, Series 2016-3A C^ | 2.46 | % | 01/18/2022 | 697,549 | |||||||
1,000,000 | Westlake Automobile Receivables Trust, Series 2017-1A D^ | 3.46 | % | 10/17/2022 | 996,422 | |||||||
300,000 | Westlake Automobile Receivables Trust, Series 2017-2A D^ | 3.28 | % | 12/15/2022 | 296,315 | |||||||
900,000 | Westlake Automobile Receivables Trust, Series 2018-1A D^ | 3.41 | % | 05/15/2023 | 893,975 | |||||||
375,000 | Westlake Automobile Receivables Trust, Series 2018-2A D^ | 4.00 | % | 01/16/2024 | 378,589 | |||||||
500,000 | Westlake Automobile Receivables Trust, Series 2017-2A E^ | 4.63 | % | 07/15/2024 | 500,589 | |||||||
Total Asset Backed Securities (Cost $79,339,570) | 78,821,351 |
The accompanying notes are an integral part of these financial statements.
44
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Corporate Bonds & Notes — 38.5% | ||||||||||||
400,000 | AerCap Ireland Capital DAC | 3.30 | % | 01/23/2023 | 380,640 | |||||||
950,000 | AK Steel Corp. | 7.50 | % | 07/15/2023 | 947,625 | |||||||
250,000 | AK Steel Corp. | 6.38 | % | 10/15/2025 | 193,750 | |||||||
800,000 | Allison Transmission, Inc.^ | 5.00 | % | 10/01/2024 | 771,000 | |||||||
500,000 | Allison Transmission, Inc.^ | 4.75 | % | 10/01/2027 | 447,500 | |||||||
1,000,000 | American Tower Corp. | 2.80 | % | 06/01/2020 | 992,655 | |||||||
800,000 | American Tower Corp. | 3.13 | % | 01/15/2027 | 725,450 | |||||||
310,000 | Analog Devices, Inc. | 3.90 | % | 12/15/2025 | 304,674 | |||||||
650,000 | Asbury Automotive Group, Inc. | 6.00 | % | 12/15/2024 | 625,625 | |||||||
500,000 | Ball Corp. | 5.00 | % | 03/15/2022 | 503,750 | |||||||
2,000,000 | Bank of America Corp. (Fixed until 01/23/2021, then 3 Month LIBOR USD + 0.37%) | 2.74 | % | 01/23/2022 | 1,970,234 | |||||||
1,800,000 | BWX Technologies, Inc.^ | 5.38 | % | 07/15/2026 | 1,740,960 | |||||||
750,000 | California Resources Corp.^ | 8.00 | % | 12/15/2022 | 510,000 | |||||||
1,000,000 | Capital One Financial Corp. (Fixed until 06/01/2020, then 3 Month LIBOR USD + 3.80%) | 5.55 | % | 12/29/2049 | 965,610 | |||||||
500,000 | Caterpillar Financial Services Corp. (3 Month LIBOR USD + 0.59%) | 3.33 | % | 06/06/2022 | 499,154 | |||||||
1,000,000 | Citigroup, Inc. | 2.65 | % | 10/26/2020 | 987,138 | |||||||
500,000 | Clorox Co. | 3.10 | % | 10/01/2027 | 475,683 | |||||||
200,000 | CommScope Technologies LLC^ | 6.00 | % | 06/15/2025 | 183,000 | |||||||
100,000 | CommScope Technologies LLC^ | 5.00 | % | 03/15/2027 | 81,250 | |||||||
800,000 | Core & Main L.P.^ | 6.13 | % | 08/15/2025 | 708,000 | |||||||
250,000 | Cornerstone Chemical Co.^ | 6.75 | % | 08/15/2024 | 220,625 | |||||||
1,220,000 | Crown Castle International Corp. | 4.88 | % | 04/15/2022 | 1,256,308 | |||||||
300,000 | Dana, Inc. | 6.00 | % | 09/15/2023 | 299,625 | |||||||
1,400,000 | Delphi Technologies PLC^ | 5.00 | % | 10/01/2025 | 1,179,500 | |||||||
600,000 | Digital Realty Trust L.P. | 3.70 | % | 08/15/2027 | 567,319 | |||||||
358,000 | Dollar General Corp. | 4.15 | % | 11/01/2025 | 357,906 | |||||||
2,000,000 | Dollar Tree, Inc. (3 Month LIBOR USD + 0.70%) | 3.15 | % | 04/17/2020 | 1,987,618 | |||||||
1,700,000 | Energy Transfer Operating L.P. (Fixed until 02/15/2023, then 3 Month LIBOR USD + 4.03%) | 6.25 | % | 05/15/2023 | 1,425,875 | |||||||
1,800,000 | Enterprise Products Operating LLC (Fixed until 08/16/2027, then 3 Month LIBOR USD + 3.03%) | 5.25 | % | 08/16/2077 | 1,502,503 | |||||||
2,000,000 | Equinix, Inc. | 5.88 | % | 01/15/2026 | 2,020,000 | |||||||
380,000 | Equinix, Inc. | 5.38 | % | 05/15/2027 | 372,400 | |||||||
1,900,000 | Exelon Corp. | 2.85 | % | 06/15/2020 | 1,885,607 | |||||||
700,000 | First Quality Finance Co., Inc.^ | 5.00 | % | 07/01/2025 | 628,250 | |||||||
1,100,000 | frontdoor, Inc.^ | 6.75 | % | 08/15/2026 | 1,047,750 | |||||||
750,000 | Goldman Sachs Group, Inc. (3 Month LIBOR USD + 0.75%) | 3.43 | % | 02/23/2023 | 725,258 | |||||||
750,000 | Harris Corp. | 3.83 | % | 04/27/2025 | 736,690 | |||||||
1,000,000 | Hasbro, Inc. | 3.15 | % | 05/15/2021 | 985,616 | |||||||
698,000 | Hasbro, Inc. | 3.50 | % | 09/15/2027 | 648,392 | |||||||
1,700,000 | HCA, Inc. | 6.50 | % | 02/15/2020 | 1,746,750 | |||||||
1,000,000 | HCA, Inc. | 5.38 | % | 02/01/2025 | 977,500 | |||||||
200,000 | Healthcare Trust of America Holdings L.P. | 3.75 | % | 07/01/2027 | 190,770 | |||||||
750,000 | High Ridge Brands Co.^ | 8.88 | % | 03/15/2025 | 333,750 | |||||||
506,000 | Hot Topic, Inc.^ | 9.25 | % | 06/15/2021 | 498,410 | |||||||
450,000 | Hudbay Minerals, Inc.^ | 7.25 | % | 01/15/2023 | 446,625 | |||||||
2,000,000 | Huntsman International LLC | 4.88 | % | 11/15/2020 | 2,015,000 | |||||||
300,000 | JB Hunt Transport Services, Inc. | 2.40 | % | 03/15/2019 | 299,503 | |||||||
500,000 | JC Penney Corp, Inc. | 8.13 | % | 10/01/2019 | 467,500 | |||||||
1,100,000 | JC Penney Corp, Inc.^ | 5.88 | % | 07/01/2023 | 891,000 | |||||||
300,000 | Keysight Technologies, Inc. | 4.55 | % | 10/30/2024 | 306,387 | |||||||
1,500,000 | Kinross Gold Corp. | 5.95 | % | 03/15/2024 | 1,500,000 | |||||||
500,000 | Kinross Gold Corp. | 4.50 | % | 07/15/2027 | 433,125 | |||||||
1,610,000 | Lamar Media Corp. | 5.75 | % | 02/01/2026 | 1,636,163 | |||||||
460,000 | Land O’ Lakes, Inc.^ | 7.25 | % | 07/14/2027 | 447,350 | |||||||
1,000,000 | Martin Marietta Materials, Inc. (3 Month LIBOR USD + 0.50%) | 3.29 | % | 12/20/2019 | 997,268 | |||||||
650,000 | Matterhorn Merger Sub LLC^ | 8.50 | % | 06/01/2026 | 520,000 | |||||||
68,000 | Mercer International, Inc. | 7.75 | % | 12/01/2022 | 70,210 |
The accompanying notes are an integral part of these financial statements.
45
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Corporate Bonds & Notes — 38.5% (Continued) | |||||||||||||
1,500,000 | Mercer International, Inc. | 6.50 | % | 02/01/2024 | 1,473,750 | ||||||||
1,500,000 | Morgan Stanley | 2.63 | % | 11/17/2021 | 1,464,642 | ||||||||
1,300,000 | NXP BV^ | 4.13 | % | 06/01/2021 | 1,287,000 | ||||||||
947,000 | Oasis Petroleum, Inc. | 6.88 | % | 03/15/2022 | 894,915 | ||||||||
1,465,000 | Outfront Media Capital LLC | 5.88 | % | 03/15/2025 | 1,443,025 | ||||||||
1,057,000 | Regency Centers L.P. | 4.80 | % | 04/15/2021 | 1,081,216 | ||||||||
250,000 | Rivers Pittsburgh Borrower L.P.^ | 6.13 | % | 08/15/2021 | 243,125 | ||||||||
1,780,000 | ServiceMaster Co. LLC | 7.45 | % | 08/15/2027 | 1,824,500 | ||||||||
650,000 | SESI LLC | 7.13 | % | 12/15/2021 | 555,750 | ||||||||
850,000 | SESI LLC | 7.75 | % | 09/15/2024 | 680,000 | ||||||||
2,000,000 | Southern California Edison Co. (Fixed until 02/01/2022, then 3 Month LIBOR USD + 4.20%) | 6.25 | % | 08/01/2049 | 1,910,000 | ||||||||
350,000 | Starfruit Finco BV^ | 8.00 | % | 10/01/2026 | 324,625 | ||||||||
850,000 | Steel Dynamics, Inc. | 5.13 | % | 10/01/2021 | 850,000 | ||||||||
370,000 | TechnipFMC PLC | 3.45 | % | 10/01/2022 | 365,537 | ||||||||
530,000 | Teck Resources, Ltd.^ | 8.50 | % | 06/01/2024 | 569,088 | ||||||||
250,000 | Tenneco, Inc. | 5.00 | % | 07/15/2026 | 193,563 | ||||||||
250,000 | TransDigm, Inc. | 6.00 | % | 07/15/2022 | 246,875 | ||||||||
550,000 | USA Compression Partners L.P.^ | 6.88 | % | 04/01/2026 | 530,750 | ||||||||
610,000 | Verisk Analytics, Inc. | 4.00 | % | 06/15/2025 | 613,233 | ||||||||
350,000 | Verizon Communications, Inc. (3 Month LIBOR USD + 1.00%) | 3.79 | % | 03/16/2022 | 350,539 | ||||||||
1,575,000 | Viking Cruises, Ltd.^ | 5.88 | % | 09/15/2027 | 1,472,625 | ||||||||
1,000,000 | Vulcan Materials Co. (3 Month LIBOR USD + 0.60%) | 3.39 | % | 06/15/2020 | 993,915 | ||||||||
1,300,000 | West Fraser Timber Co., Ltd.^ | 4.35 | % | 10/15/2024 | 1,289,761 | ||||||||
700,000 | Western Gas Partners LP | 5.38 | % | 06/01/2021 | 721,349 | ||||||||
1,500,000 | Weyerhaeuser Co. | 7.38 | % | 10/01/2019 | 1,541,570 | ||||||||
500,000 | Whiting Petroleum Corp. | 5.75 | % | 03/15/2021 | 477,500 | ||||||||
1,100,000 | Zimmer Biomet Holdings, Inc. (3 Month LIBOR USD + 0.75%) | 3.55 | % | 03/19/2021 | 1,090,045 | ||||||||
Total Corporate Bonds & Notes (Cost $73,201,536) | 70,127,149 | ||||||||||||
Mortgage Backed Securities — 12.8% | |||||||||||||
400,000 | BAMLL Commercial Mortgage Securities Trust, | ||||||||||||
Series 2018-DSNY C (1 Month LIBOR USD + 1.35%)^ | 3.81 | % | 09/15/2034 | 398,762 | |||||||||
750,000 | BAMLL Commercial Mortgage Securities Trust, | ||||||||||||
Series 2018-DSNY D (1 Month LIBOR USD + 1.70%)^ | 4.16 | % | 09/15/2034 | 749,258 | |||||||||
400,000 | BBCMS Mortgage Trust, Series 2018-TALL C (1 Month LIBOR USD + 1.12%)^ | 3.58 | % | 03/16/2037 | 390,863 | ||||||||
499,255 | BX Commercial Mortgage Trust, Series 2018-IND B (1 Month LIBOR USD + 0.90%)^ | 3.36 | % | 11/15/2035 | 495,785 | ||||||||
998,510 | BX Commercial Mortgage Trust, Series 2018-IND D (1 Month LIBOR USD + 1.30%)^ | 3.76 | % | 11/15/2035 | 988,515 | ||||||||
15,333 | FHLMC PC, Pool# E0-1654 | 5.00 | % | 06/01/2019 | 15,556 | ||||||||
44,150 | FHLMC PC, Pool# N3-1000 | 4.50 | % | 08/01/2033 | 45,471 | ||||||||
804,123 | FHLMC REMIC, Series 4107~ | 3.00 | % | 08/15/2027 | 148,238 | ||||||||
54,948 | FHLMC REMIC, Series 3878 | 3.00 | % | 04/15/2041 | 55,277 | ||||||||
1,597,733 | FHLMC REMIC, Series 4143~ | 3.50 | % | 09/15/2042 | 184,016 | ||||||||
335,000 | FHLMC SCRTT, Series 2016-1 M1#^ | 3.00 | % | 09/25/2055 | 324,630 | ||||||||
357,233 | FHMS, Series K-J13 A1 | 2.06 | % | 09/25/2021 | 354,461 | ||||||||
15,801,547 | FHMS, Series K-016 A1#~ | 1.49 | % | 10/25/2021 | 554,230 | ||||||||
288,720 | FHMS, Series K-021 A1 | 1.60 | % | 01/25/2022 | 283,435 | ||||||||
260,217 | FHMS, Series K-J18 A1 | 2.46 | % | 03/25/2022 | 258,224 | ||||||||
241,846 | FHMS, Series K-J16 A1 | 1.97 | % | 04/25/2022 | 237,640 | ||||||||
107,302 | FHMS, Series K-J09 A1 | 2.02 | % | 04/25/2022 | 105,786 | ||||||||
4,179,117 | FHMS, Series K-021 X1#~ | 1.44 | % | 06/25/2022 | 175,362 | ||||||||
2,001,634 | FHMS, Series K-721 X1#~ | 0.33 | % | 08/25/2022 | 20,501 | ||||||||
2,549,398 | FHMS, Series K-023 X1#~ | 1.26 | % | 08/25/2022 | 96,986 | ||||||||
219,823 | FHMS, Series K-J07 A1# | 1.53 | % | 09/25/2022 | 214,737 | ||||||||
141,210 | FHMS, Series K-J12 A1 | 2.38 | % | 04/25/2023 | 140,024 | ||||||||
193,237 | FHMS, Series K-J14 A1 | 2.20 | % | 11/25/2023 | 189,735 | ||||||||
10,312,381 | FHMS, Series K-C02 X1#~ | 0.37 | % | 03/25/2024 | 190,279 | ||||||||
709,687 | FHMS, Series K-J17 A1 | 2.40 | % | 10/25/2024 | 701,898 |
The accompanying notes are an integral part of these financial statements.
46
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 12.8% (Continued) | ||||||||||||
802,762 | FHMS, Series K-055 X1#~ | 1.37 | % | 03/25/2026 | 65,887 | |||||||
1,342,234 | FHMS, Series K-057 X1#~ | 1.19 | % | 07/25/2026 | 98,836 | |||||||
676,999 | FHMS, Series K-058 X1#~ | 0.93 | % | 08/25/2026 | 39,893 | |||||||
1,390,823 | FHMS, Series K-W03 X1#~ | 0.85 | % | 06/25/2027 | 74,820 | |||||||
783,763 | FHMS, Series Q-006 APT1# | 2.58 | % | 04/25/2028 | 828,697 | |||||||
1,008,793 | FHMS, Series Q-004 A2H# | 2.87 | % | 01/25/2046 | 1,008,871 | |||||||
12 | FNMA, Pool# 931676 | 5.50 | % | 01/01/2019 | 12 | |||||||
1,062 | FNMA, Pool# 774887 | 5.50 | % | 05/01/2019 | 1,061 | |||||||
5,500 | FNMA, Pool# 794149 | 5.50 | % | 08/01/2019 | 5,500 | |||||||
8,964 | FNMA, Pool# 255359 | 5.50 | % | 09/01/2019 | 8,981 | |||||||
983 | FNMA, Pool# 778775 | 5.50 | % | 09/01/2019 | 983 | |||||||
6,965 | FNMA, Pool# 785732 | 5.50 | % | 11/01/2019 | 6,969 | |||||||
17,392 | FNMA, Pool# 255645 | 4.00 | % | 01/01/2020 | 17,817 | |||||||
5,282 | FNMA, Pool# 826868 | 5.50 | % | 08/01/2020 | 5,287 | |||||||
26,882 | FNMA, Pool# 879409 | 5.50 | % | 02/01/2021 | 27,262 | |||||||
11,280 | FNMA, Pool# 745562 | 5.50 | % | 04/01/2021 | 11,428 | |||||||
22,220 | FNMA, Pool# AD0230 | 5.50 | % | 05/01/2021 | 22,558 | |||||||
4,395 | FNMA, Pool# 745525 | 5.50 | % | 05/01/2021 | 4,472 | |||||||
4,739 | FNMA, Pool# 936481 | 5.50 | % | 07/01/2021 | 4,822 | |||||||
5,054 | FNMA, Pool# 888555 | 5.50 | % | 09/01/2021 | 5,116 | |||||||
727 | FNMA, Pool# 889849 | 5.50 | % | 09/01/2021 | 728 | |||||||
5,623 | FNMA, Pool# 908560 | 5.50 | % | 01/01/2022 | 5,692 | |||||||
4,948 | FNMA, Pool# 889716 | 5.50 | % | 10/01/2022 | 5,096 | |||||||
3,064 | FNMA, Pool# 889198 | 5.50 | % | 11/01/2022 | 3,105 | |||||||
45,071 | FNMA, Pool# 911073 | 5.50 | % | 12/01/2022 | 46,206 | |||||||
11,226 | FNMA, Pool# 972932 | 5.50 | % | 02/01/2023 | 11,460 | |||||||
328,724 | FNMA, Pool# AB9392 | 2.50 | % | 05/01/2023 | 329,264 | |||||||
67,290 | FNMA, Pool# 975076 | 6.00 | % | 09/01/2023 | 69,598 | |||||||
5,550 | FNMA, Pool# 995217 | 5.50 | % | 12/01/2023 | 5,720 | |||||||
12,320 | FNMA, Pool# 930334 | 5.50 | % | 01/01/2024 | 12,772 | |||||||
6,877 | FNMA, Pool# AE0467 | 5.50 | % | 03/01/2024 | 7,118 | |||||||
6,131 | FNMA, Pool# AD0365 | 5.50 | % | 09/01/2024 | 6,318 | |||||||
42,975 | FNMA, Pool# AL1081 | 5.00 | % | 07/01/2025 | 43,632 | |||||||
28,197 | FNMA, Pool# AL0517 | 5.50 | % | 08/01/2025 | 29,199 | |||||||
233,704 | FNMA, Pool# 815323 (6 Month LIBOR USD + 1.54%) | 4.17 | % | 01/01/2035 | 241,350 | |||||||
230,439 | FNMA, Pool# 813714 (1 Year CMT Rate + 1.94%) | 4.46 | % | 01/01/2035 | 241,561 | |||||||
68,143 | FNMA, Pool# 910181 (12 Month LIBOR USD + 1.71%) | 3.78 | % | 03/01/2037 | 71,375 | |||||||
273,155 | FNMA, Pool# 915191 (12 Month LIBOR USD + 1.73%) | 4.10 | % | 04/01/2037 | 288,927 | |||||||
409,081 | FNMA, Pool# AL6262 (1 Year CMT Rate + 2.38%) | 4.66 | % | 04/01/2038 | 426,014 | |||||||
209,381 | FNMA, Pool# 965184 (12 Month LIBOR USD + 1.60%) | 4.35 | % | 09/01/2038 | 218,194 | |||||||
676,758 | FNMA, Pool# BM4143 | 6.00 | % | 07/01/2041 | 738,860 | |||||||
461,312 | FNMA, Pool# AU6230 | 5.00 | % | 09/01/2043 | 488,548 | |||||||
258,797 | FNMA, Pool# 947512 (12 Month LIBOR USD + 1.75%) | 4.50 | % | 09/01/2047 | 270,966 | |||||||
68,776 | FNMA REMIC Trust, Series 2002-16 | 6.00 | % | 04/25/2022 | 70,550 | |||||||
648,449 | FNMA REMIC Trust, Series 2012-65 | 5.00 | % | 07/25/2040 | 702,782 | |||||||
4,000,000 | FNMA, 5.0%, Due TBA January | 5.00 | % | 01/15/2048 | 4,190,313 | |||||||
650,000 | FREMF Mortgage Trust, Series 2017-K729 B#^ | 3.67 | % | 11/25/2024 | 641,393 | |||||||
90,000 | FREMF Mortgage Trust, Series 2011-K10#^ | 4.62 | % | 11/25/2049 | 91,999 | |||||||
232,986 | GNMA, Pool# 004527M | 5.00 | % | 09/20/2024 | 252,428 | |||||||
558,465 | GNMA REMIC Trust, Series 2014-45 B1#~ | 0.75 | % | 07/16/2054 | 25,523 | |||||||
477,130 | GNMA REMIC Trust, Series 2014-135 I0#~ | 0.82 | % | 01/16/2056 | 24,882 | |||||||
471,848 | GNMA REMIC Trust, Series 2015-172 I0#~ | 0.90 | % | 03/16/2057 | 29,160 | |||||||
640,127 | GNMA REMIC Trust, Series 2016-40 I0#~ | 0.77 | % | 07/16/2057 | 35,719 | |||||||
519,417 | GNMA REMIC Trust, Series 2016-56 I0#~ | 0.97 | % | 11/16/2057 | 36,294 | |||||||
635,042 | GNMA REMIC Trust, Series 2016-98 I0#~ | 0.95 | % | 05/16/2058 | 46,794 | |||||||
500,000 | GSMS, Series 2018-FBLU C (1 Month LIBOR USD + 1.60%)^ | 4.06 | % | 11/15/2035 | 497,011 |
The accompanying notes are an integral part of these financial statements.
47
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Mortgage Backed Securities — 12.8% (Continued) | |||||||||||||
1,250,000 | GSMS, Series 2018-FBLU D (1 Month LIBOR USD + 2.00%)^ | 4.46 | % | 11/15/2035 | 1,236,727 | ||||||||
385,000 | MAD Mortgage Trust, Series 2017-330M B#^ | 3.37 | % | 08/17/2034 | 379,611 | ||||||||
275,000 | MSC, Series 2017-CLS C (1 Month LIBOR USD + 1.00%)^ | 3.46 | % | 11/15/2034 | 271,166 | ||||||||
175,000 | MSC, Series 2017-CLS D (1 Month LIBOR USD + 1.40%)^ | 3.86 | % | 11/15/2034 | 172,716 | ||||||||
500,000 | Velocity Commercial Capital Loan Trust, Series 2016-2 M1# | 3.66 | % | 10/25/2046 | 502,771 | ||||||||
500,000 | Velocity Commercial Capital Loan Trust, Series 2017-1 M1#^ | 3.55 | % | 05/25/2047 | 489,321 | ||||||||
482,863 | Velocity Commercial Capital Loan Trust, Series 2018-2 A#^ | 4.05 | % | 10/25/2048 | 487,331 | ||||||||
Total Mortgage Backed Securities (Cost $23,115,854) | 23,305,135 | ||||||||||||
�� | |||||||||||||
Municipal Bonds — 3.2% | |||||||||||||
400,000 | District of Columbia# | 6.55 | % | 08/01/2038 | 400,000 | ||||||||
1,500,000 | District of Columbia# | 6.71 | % | 08/01/2038 | 1,500,000 | ||||||||
750,000 | Massachusetts Port Authority# | 4.99 | % | 01/01/2031 | 750,000 | ||||||||
700,000 | Mosaic District Community Development Authority | 7.25 | % | 03/01/2036 | 737,681 | ||||||||
640,000 | New York Transportation Development Corp. | 5.00 | % | 08/01/2026 | 668,109 | ||||||||
225,000 | North Texas Tollway Authority | 8.91 | % | 02/01/2030 | 238,054 | ||||||||
500,000 | Public Finance Authority^ | 5.00 | % | 09/01/2030 | 517,395 | ||||||||
385,000 | Utah Charter School Finance Authority | 5.80 | % | 06/15/2038 | 385,616 | ||||||||
550,000 | Washington State Housing Finance Commission^ | 4.00 | % | 01/01/2024 | 549,736 | ||||||||
130,000 | Yamhill County Oregon Hospital Authority | 3.50 | % | 11/15/2020 | 129,393 | ||||||||
Total Municipal Bonds (Cost $5,717,041) | 5,875,984 | ||||||||||||
Preferred Stocks — 0.7% | |||||||||||||
16,475 | AGNC Investment Corp., Series B, 7.75% | 417,806 | |||||||||||
2,076 | AGNC Investment Corp., Series C, 7.00% | ||||||||||||
(Fixed until 10/15/2022, then 3 Month LIBOR USD + 5.11%) | 52,481 | ||||||||||||
10,000 | Annaly Capital Management, Inc., Series G, 6.50% | ||||||||||||
(Fixed until 03/31/2023, then 3 Month LIBOR USD + 4.17%) | 232,300 | ||||||||||||
24,630 | Digital Realty Trust, Inc. | 515,999 | |||||||||||
Total Preferred Stocks (Cost $1,312,819) | 1,218,586 | ||||||||||||
Closed-End Funds — 0.2% | |||||||||||||
17,204 | BlackRock MuniYield Michigan Quality Fund | 213,674 | |||||||||||
9,600 | Nuveen Massachusetts Quality Municipal Income Fund | 112,704 | |||||||||||
Total Closed-End Funds (Cost $376,993) | 326,378 | ||||||||||||
Short-Term Investments — 2.7% | |||||||||||||
Money Market Funds — 2.7% | |||||||||||||
4,879,460 | First American Government Obligations Fund — Class Z, 2.32%* | 4,879,460 | |||||||||||
Total Short-Term Investments (Cost $4,879,460) | 4,879,460 | ||||||||||||
Total Investments — 101.4% (Cost $187,943,273) | 184,554,043 | ||||||||||||
Liabilities in Excess of Other Assets — (1.4)% | (2,631,090 | ) | |||||||||||
NET ASSETS — 100.0% | $ | 181,922,953 |
# | Variable rate security. Rate disclosed is as of December 31, 2018. |
^ | 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, 2018, the value of these securities amounted to $93,167,172 or 51.2% of net assets. |
< | This security is being fair valued, using significant unobservable inputs (Level 3), under the supervision of the Board of Trustees. |
~ | Interest Only Security |
* | Annualized seven-day yield as of December 31, 2018. |
The accompanying notes are an integral part of these financial statements.
48
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
Asset Backed Securities | 43.3% |
Corporate Bonds & Notes | 38.5% |
Mortgage Backed Securities | 12.8% |
Municipal Bonds | 3.2% |
Money Market Funds | 2.7% |
Preferred Stocks | 0.7% |
Closed-End Funds | 0.2% |
Other Assets and Liabilities | (1.4)% |
100.0% |
The accompanying notes are an integral part of these financial statements.
49
Brown Advisory Sustainable Bond Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Sustainable Bond Fund – Investor Shares (the “Fund”) was up 0.95%, trailing the 1.65% return for the primary benchmark, the Bloomberg Barclays US Aggregate Bond Index (the “Index”).
The Fund aims to generate performance primarily through individual security selection that augments fundamental credit analysis with integrated ESG research. The Fund seeks to identify and invest in issuers whose ESG characteristics strengthen their credit profiles, as well as issuers whose use of proceeds create positive environmental and social impacts. Intermediate-term risk/reward analysis, as opposed to macro forecasts, helps set the duration and sector weightings.
The second half of 2018 was a tumultuous period for credit markets. Spreads of all types widened meaningfully, especially during the fourth quarter, where both high-yield and investment-grade corporate bonds had their worst quarters since 2011. Our investment philosophy of seeking alpha through individual bond selection naturally leads us to owning more spread bonds and fewer Treasury bonds. While this was detrimental to performance in the most recent period, this has been a major driver of the Fund’s strong longer-term track record.
Our overweight to corporate bonds generally was somewhat of a detractor for the period. Security selection was strong enough, however, to make corporate credit a net contributor to performance, although our high-yield securities underperformed other positions. Among our largest positive-contributing individual corporate selections were Verisk Analytics (5.53%), Equinix (5.04%), Keysight Technologies (3.78%), and American Tower (3.23%).
Other credit-oriented sectors also underperformed Treasury bonds, including asset-backed and commercial mortgage-backed securities. Our holdings in these sectors, however, are generally higher-quality and/or shorter-term, which ameliorated the spreads widening.
While we are always disappointed about periods of underperformance, we are pleased with the portfolio��s potential looking forward. Our focus on downside analysis is designed to help us navigate periods like this. We start our security selection process with a strong idea of how we think a bond should perform in an adverse market, and we believe that this gives the Fund the potential to weather periods of volatility from a position of strength. In the long run, we believe that this focus on the downside plus a strong level of income generation may result in strong performance.
We are happy to announce that we launched our first annual Impact Report on the Fund that highlights the environmental and social impact from our investments over the past year. We welcome your feedback to help us enhance our reporting efforts.
Sincerely,
Thomas D.D. Graff, CFA
Portfolio Manager
Amy Hauter, CFA
Associate 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.
50
Brown Advisory Sustainable Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Corporate Bonds & Notes — 39.6% | |||||||||||||
1,345,000 | Albemarle Corp. | 4.15 | % | 12/01/2024 | 1,364,100 | ||||||||
895,000 | Alexandria Real Estate Equities, Inc. | 4.00 | % | 01/15/2024 | 906,301 | ||||||||
1,490,000 | Allison Transmission, Inc.^ | 4.75 | % | 10/01/2027 | 1,333,550 | ||||||||
1,485,000 | American Tower Corp. | 3.13 | % | 01/15/2027 | 1,346,616 | ||||||||
1,380,000 | Analog Devices, Inc. | 3.90 | % | 12/15/2025 | 1,356,289 | ||||||||
890,000 | AvalonBay Communities, Inc. | 3.63 | % | 10/01/2020 | 895,303 | ||||||||
1,610,000 | Ball Corp. | 4.88 | % | 03/15/2026 | 1,573,775 | ||||||||
1,125,000 | Bank of America Corp. (Fixed until 05/17/2021, then 3 Month LIBOR USD + 0.63%) | 3.50 | % | 05/17/2022 | 1,125,550 | ||||||||
1,165,000 | Boston Properties L.P. | 3.65 | % | 02/01/2026 | 1,129,060 | ||||||||
790,000 | Children’s Hospital Corp. | 4.12 | % | 01/01/2047 | 794,881 | ||||||||
950,000 | Clorox Co. | 3.10 | % | 10/01/2027 | 903,798 | ||||||||
1,000,000 | Core & Main L.P.^ | 6.13 | % | 08/15/2025 | 885,000 | ||||||||
1,065,000 | Delphi Technologies PLC^ | 5.00 | % | 10/01/2025 | 897,263 | ||||||||
1,125,000 | Digital Realty Trust L.P. | 3.95 | % | 07/01/2022 | 1,132,559 | ||||||||
895,000 | Duke Energy Carolinas LLC | 3.35 | % | 05/15/2022 | 903,775 | ||||||||
1,535,000 | Ecolab, Inc. | 4.35 | % | 12/08/2021 | 1,578,129 | ||||||||
890,000 | Express Scripts Holding Co. | 4.50 | % | 02/25/2026 | 903,374 | ||||||||
1,470,000 | Hasbro, Inc. | 3.50 | % | 09/15/2027 | 1,365,526 | ||||||||
905,000 | JB Hunt Transport Services, Inc. | 3.30 | % | 08/15/2022 | 898,402 | ||||||||
20,000 | Kaiser Foundation Hospitals | 3.15 | % | 05/01/2027 | 19,247 | ||||||||
1,335,000 | Keysight Technologies, Inc. | 4.55 | % | 10/30/2024 | 1,363,421 | ||||||||
850,000 | Korea Development Bank (3 Month LIBOR USD + 0.73%) | 3.14 | % | 07/06/2022 | 851,362 | ||||||||
1,195,000 | Kroger Co. | 3.70 | % | 08/01/2027 | 1,130,142 | ||||||||
1,355,000 | Land O’ Lakes, Inc.^ | 7.25 | % | 07/14/2027 | 1,317,738 | ||||||||
925,000 | MidAmerican Energy Co. | 3.10 | % | 05/01/2027 | 901,276 | ||||||||
1,920,000 | Northwell Healthcare, Inc. | 4.26 | % | 11/01/2047 | 1,827,681 | ||||||||
475,000 | Northwestern University | 3.81 | % | 12/01/2050 | 473,139 | ||||||||
435,000 | Novelis Corp.^ | 6.25 | % | 08/15/2024 | 409,988 | ||||||||
960,000 | NXP BV^ | 4.13 | % | 06/01/2021 | 950,400 | ||||||||
650,000 | Regency Centers L.P. | 3.75 | % | 06/15/2024 | 644,026 | ||||||||
450,000 | Southern California Edison Co. (Fixed until 02/01/2022, then 3 Month LIBOR USD + 4.20%) | 6.25 | % | 08/01/2049 | 429,750 | ||||||||
920,000 | Toronto-Dominion Bank | 1.85 | % | 09/11/2020 | 903,393 | ||||||||
900,000 | Trustees of the University of Pennsylvania | 4.01 | % | 08/15/2047 | 882,909 | ||||||||
1,360,000 | Verisk Analytics, Inc. | 4.00 | % | 06/15/2025 | 1,367,209 | ||||||||
890,000 | West Fraser Timber Co., Ltd.^ | 4.35 | % | 10/15/2024 | 882,991 | ||||||||
1,040,000 | Weyerhaeuser Co. | 7.38 | % | 10/01/2019 | 1,068,822 | ||||||||
Total Corporate Bonds & Notes (Cost $37,474,310) | 36,716,745 | ||||||||||||
Mortgage Backed Securities — 25.6% | |||||||||||||
596,067 | FHMS, Series K-W03 X1#~ | 0.85 | % | 06/25/2027 | 32,066 | ||||||||
300,000 | FHMS, Series K-W03 A2 | 3.02 | % | 06/25/2027 | 294,920 | ||||||||
881,733 | FHMS, Series Q-006 APT1# | 2.58 | % | 04/25/2028 | 932,284 | ||||||||
1,334,850 | FHMS, Series K-W07 A1 | 3.60 | % | 07/25/2028 | 1,368,318 | ||||||||
643,229 | FHMS, Series K-W04 A (1 Month LIBOR USD + 0.24%) | 2.59 | % | 09/25/2028 | 642,986 | ||||||||
1,000,000 | FHMS, Series Q-008 A (1 Month LIBOR USD + 0.39%) | 2.69 | % | 10/25/2045 | 997,552 | ||||||||
1,144,056 | FHMS, Series Q-007 APT1# | 3.00 | % | 10/25/2047 | 1,164,071 | ||||||||
665,036 | FNMA, Pool# AN6116 | 2.85 | % | 07/01/2027 | 648,831 | ||||||||
500,000 | FNMA, Pool# AN6558 | 2.91 | % | 09/01/2027 | 483,965 | ||||||||
309,895 | FNMA, Pool# AS2826 | 4.00 | % | 07/01/2044 | 317,197 | ||||||||
287,806 | FNMA, Pool# AS3724 | 3.50 | % | 11/01/2044 | 288,984 | ||||||||
274,559 | FNMA, Pool# AS5917 | 3.50 | % | 10/01/2045 | 275,570 | ||||||||
407,146 | FNMA, Pool# AS6127 | 3.50 | % | 11/01/2045 | 408,540 | ||||||||
294,954 | FNMA, Pool# AS8808 | 3.50 | % | 02/01/2047 | 295,675 | ||||||||
990,969 | FNMA, Pool# BJ4049 | 4.00 | % | 05/01/2048 | 1,016,066 | ||||||||
198,427 | FNMA, Pool# BJ4050 | 4.50 | % | 05/01/2048 | 207,948 | ||||||||
198,473 | FNMA, Pool# BJ4052 | 4.50 | % | 05/01/2048 | 207,557 | ||||||||
297,223 | FNMA, Pool# BJ4051 | 4.50 | % | 05/01/2048 | 311,659 |
The accompanying notes are an integral part of these financial statements.
51
Brown Advisory Sustainable Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Mortgage Backed Securities — 25.6% (Continued) | |||||||||||||
198,591 | FNMA, Pool# BK5105 | 5.50 | % | 05/01/2048 | 212,507 | ||||||||
198,554 | FNMA, Pool# BJ4057 | 4.50 | % | 06/01/2048 | 206,668 | ||||||||
198,907 | FNMA, Pool# BK8032 | 5.50 | % | 06/01/2048 | 212,845 | ||||||||
248,591 | FNMA, Pool# BJ4061 | 4.50 | % | 07/01/2048 | 260,745 | ||||||||
247,575 | FNMA, Pool# BJ4062 | 4.50 | % | 07/01/2048 | 257,961 | ||||||||
248,488 | FNMA, Pool# BJ4060 | 4.50 | % | 07/01/2048 | 260,579 | ||||||||
995,624 | FNMA, Pool# BJ4067 | 4.50 | % | 08/01/2048 | 1,039,080 | ||||||||
461,606 | FNMA, Pool# BJ4070 | 4.00 | % | 09/01/2048 | 473,864 | ||||||||
260,992 | FNMA, Pool# BJ4073 | 4.50 | % | 09/01/2048 | 273,513 | ||||||||
248,977 | FNMA, Pool# BJ4072 | 4.50 | % | 09/01/2048 | 261,151 | ||||||||
237,514 | FNMA, Pool# BJ4075 | 5.00 | % | 09/01/2048 | 253,200 | ||||||||
199,227 | FNMA, Pool# BN0202 | 5.50 | % | 09/01/2048 | 213,188 | ||||||||
498,689 | FNMA, Pool# BJ4078 | 4.50 | % | 10/01/2048 | 522,379 | ||||||||
498,913 | FNMA, Pool# BJ4079 | 5.00 | % | 10/01/2048 | 530,706 | ||||||||
499,454 | FNMA, Pool# BJ4082 | 5.00 | % | 11/01/2048 | 533,753 | ||||||||
300,000 | FNMA REMIC Trust, Series 2017-M10 AV2# | 2.56 | % | 07/25/2024 | 295,276 | ||||||||
80,000 | FNMA REMIC Trust, Series 2017-M2 A2# | 2.78 | % | 02/25/2027 | 77,376 | ||||||||
831,000 | FNMA REMIC Trust, Series 2017-M13 A2# | 2.94 | % | 09/25/2027 | 808,971 | ||||||||
865,000 | FNMA REMIC Trust, Series 2017-M15 A2# | 2.96 | % | 09/25/2027 | 842,217 | ||||||||
1,374,394 | FNMA REMIC Trust, Series 2018-M2 A1# | 2.80 | % | 01/25/2028 | 1,375,607 | ||||||||
1,900,000 | FNMA REMIC Trust, Series 2018-M2 A2# | 2.90 | % | 01/25/2028 | 1,835,596 | ||||||||
1,600,000 | FNMA REMIC Trust, Series 2018-M8 A2# | 3.33 | % | 06/25/2028 | 1,595,715 | ||||||||
998,926 | FNMA REMIC Trust, Series 2018-M13 A1# | 3.82 | % | 09/25/2030 | 1,053,813 | ||||||||
200,000 | MSC, Series 2017-CLS A (1 Month LIBOR USD + 0.70%)^ | 3.16 | % | 11/15/2034 | 197,113 | ||||||||
100,000 | MSC, Series 2017-CLS C (1 Month LIBOR USD + 1.00%)^ | 3.46 | % | 11/15/2034 | 98,606 | ||||||||
100,000 | MSC, Series 2017-CLS D (1 Month LIBOR USD + 1.40%)^ | 3.86 | % | 11/15/2034 | 98,695 | ||||||||
Total Mortgage Backed Securities (Cost $23,494,610) | 23,685,313 | ||||||||||||
Municipal Bonds — 11.9% | |||||||||||||
300,000 | Atlanta Development Authority | 3.57 | % | 12/01/2036 | 295,224 | ||||||||
75,000 | District of Columbia# | 6.55 | % | 08/01/2038 | 75,000 | ||||||||
600,000 | District of Columbia# | 6.71 | % | 08/01/2038 | 600,000 | ||||||||
1,060,000 | Grant County Washington Public Utility | 5.63 | % | 01/01/2027 | 1,240,719 | ||||||||
100,000 | Honolulu, City & County Hawaii | 3.00 | % | 09/01/2027 | 97,899 | ||||||||
850,000 | Honolulu, City & County Hawaii | 4.00 | % | 09/01/2036 | 853,587 | ||||||||
30,000 | Los Angeles California Community College District | 6.60 | % | 08/01/2042 | 41,330 | ||||||||
430,000 | Los Angeles California Wastewater System Revenue | 3.49 | % | 06/01/2029 | 434,876 | ||||||||
40,000 | Maryland Community Development Administration | 3.24 | % | 09/01/2048 | 39,477 | ||||||||
110,000 | Massachusetts, Commonwealth of | 3.28 | % | 06/01/2046 | 101,248 | ||||||||
530,000 | Miami-Dade County Florida Aviation | 3.98 | % | 10/01/2041 | 510,104 | ||||||||
675,000 | Miami-Dade County Florida Educational Facilities Authority | 4.47 | % | 04/01/2051 | 684,997 | ||||||||
650,000 | Montgomery County Virginia Economic Development Authority | 3.95 | % | 06/01/2039 | 647,621 | ||||||||
340,000 | New York State Dormitory Authority | 4.00 | % | 07/01/2039 | 340,796 | ||||||||
780,000 | New York State Environmental Facilities Corp. | 2.77 | % | 07/15/2031 | 730,283 | ||||||||
250,000 | New York Transportation Development Corp. | 5.00 | % | 01/01/2036 | 274,873 | ||||||||
100,000 | Ohio Air Quality Development Authority^ | 3.75 | % | 01/15/2028 | 99,695 | ||||||||
475,000 | Oregon State University | 3.75 | % | 04/01/2049 | 442,330 | ||||||||
250,000 | Pennsylvania Economic Development | 3.20 | % | 11/15/2027 | 244,385 | ||||||||
20,000 | San Diego California Redevelopment Agency Successor Agency | 4.00 | % | 09/01/2040 | 19,968 | ||||||||
500,000 | San Francisco, City & County of California Community Facilities District | 3.75 | % | 09/01/2037 | 491,550 | ||||||||
60,000 | San Francisco, City & County of California Public Utilities Commission Water Revenue | 3.55 | % | 11/01/2031 | 60,134 | ||||||||
480,000 | Southern California Public Power Authority | 4.31 | % | 07/01/2029 | 498,974 | ||||||||
790,000 | Texas A&M University | 3.82 | % | 05/15/2047 | 770,732 | ||||||||
355,000 | University of California | 2.99 | % | 05/15/2026 | 347,765 | ||||||||
850,000 | University of Massachusetts Building Authority | 5.45 | % | 11/01/2040 | 1,001,878 | ||||||||
25,000 | University of North Texas System | 3.69 | % | 04/15/2030 | 25,433 | ||||||||
Total Municipal Bonds (Cost $10,974,914) | 10,970,878 |
The accompanying notes are an integral part of these financial statements.
52
Brown Advisory Sustainable Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Foreign Government Bonds — 8.7% | |||||||||||||
1,795,000 | African Development Bank | 3.00 | % | 12/06/2021 | 1,812,953 | ||||||||
1,030,000 | BNG Bank NV^ | 2.13 | % | 12/14/2020 | 1,019,727 | ||||||||
765,000 | European Bank for Reconstruction & Development | 0.88 | % | 07/22/2019 | 758,373 | ||||||||
705,000 | European Investment Bank | 2.38 | % | 05/24/2027 | 677,759 | ||||||||
1,000,000 | Industrial Bank of Korea (3 Month LIBOR USD + 0.60%)^ | 3.16 | % | 08/02/2021 | 1,001,770 | ||||||||
1,790,000 | International Finance Corp. | 2.00 | % | 10/24/2022 | 1,750,695 | ||||||||
1,090,000 | Kreditanstalt fuer Wiederaufbau | 2.00 | % | 09/29/2022 | 1,065,813 | ||||||||
Total Foreign Government Bonds (Cost $8,096,133) | 8,087,090 | ||||||||||||
Asset Backed Securities — 5.2% | |||||||||||||
978,904 | Newtek Small Business Loan Trust, Series 2018-1 A (1 Month LIBOR USD + 1.70%)^ | 4.21 | % | 02/25/2044 | 979,574 | ||||||||
250,000 | Oportun Funding IX LLC, Series 2018-B A^ | 3.91 | % | 07/08/2024 | 250,310 | ||||||||
250,000 | Oportun Funding VII LLC, Series 2017-B B^ | 4.26 | % | 10/10/2023 | 250,372 | ||||||||
400,000 | Oportun Funding X LLC, Series 2018-C A^ | 4.10 | % | 10/08/2024 | 404,113 | ||||||||
250,000 | Oportun Funding X LLC, Series 2018-C B^ | 4.59 | % | 10/08/2024 | 253,184 | ||||||||
385,296 | Tesla Auto Lease Trust, Series 2018-A A^ | 2.32 | % | 12/20/2019 | 384,267 | ||||||||
500,000 | Tesla Auto Lease Trust, Series 2018-B A^ | 3.71 | % | 08/20/2021 | 501,377 | ||||||||
825,000 | Verizon Owner Trust, Series 2017-1A C^ | 2.65 | % | 09/20/2021 | 819,939 | ||||||||
1,000,000 | Verizon Owner Trust, Series 2017-2A C^ | 2.38 | % | 12/20/2021 | 989,548 | ||||||||
Total Asset Backed Securities (Cost $4,812,002) | 4,832,684 | ||||||||||||
U.S. Treasury Notes — 8.3% | |||||||||||||
800,000 | United States Treasury Note | 1.38 | % | 02/28/2019 | 798,712 | ||||||||
3,440,000 | United States Treasury Note | 2.88 | % | 05/15/2028 | 3,493,548 | ||||||||
3,345,000 | United States Treasury Note | 2.88 | % | 08/15/2028 | 3,397,396 | ||||||||
Total U.S. Treasury Notes (Cost $7,581,241) | 7,689,656 | ||||||||||||
Short-Term Investments — 1.7% | |||||||||||||
Money Market Funds — 1.7% | |||||||||||||
1,608,114 | First American Government Obligations Fund — Class Z, 2.32%* | 1,608,114 | |||||||||||
Total Short-Term Investments (Cost $1,608,114) | 1,608,114 | ||||||||||||
Total Investments — 101.0% (Cost $94,041,324) | 93,590,480 | ||||||||||||
Liabilities in Excess of Other Assets — (1.0)% | (890,574 | ) | |||||||||||
NET ASSETS — 100.0% | $ | 92,699,906 |
# | Variable rate security. Rate disclosed is as of December 31, 2018. |
* | Annualized seven-day yield as of December 31, 2018. |
^ | 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, 2018, the value of these securities amounted to $14,025,220 or 15.1% of net assets. |
~ | Interest Only Security |
PORTFOLIO HOLDINGS
% of Net Assets
Corporate Bonds & Notes | 39.6% |
Mortgage Backed Securities | 25.6% |
Municipal Bonds | 11.9% |
Foreign Government Bonds | 8.7% |
U.S. Treasury Notes | 8.3% |
Asset Backed Securities | 5.2% |
Money Market Funds | 1.7% |
Other Assets and Liabilities | (1.0)% |
100.0% |
The accompanying notes are an integral part of these financial statements.
53
Brown Advisory Sustainable Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Futures Contracts — Long (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury Long Bond Futures | 20 | 03/20/2019 | $ | 2,788,534 | $ | 2,920,000 | $ | 131,466 | |||||||||
U.S. Treasury Ultra Bond Futures | 36 | 03/20/2019 | 5,492,425 | 5,783,625 | 291,200 | ||||||||||||
$ | 8,280,959 | $ | 8,703,625 | $ | 422,666 | ||||||||||||
Futures Contracts — Short (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury 10-Year Note Futures | (51) | 03/20/2019 | $ | (6,077,920 | ) | $ | (6,222,797 | ) | $ | (144,877 | ) | ||||||
U.S. Treasury 10-Year Ultra Futures | (56) | 03/20/2019 | (7,060,108 | ) | (7,284,375 | ) | (224,267 | ) | |||||||||
$ | (13,138,028 | ) | $ | (13,507,172 | ) | $ | (369,144 | ) |
There is no variation margin due to or from the Fund as of December 31, 2018.
The accompanying notes are an integral part of these financial statements.
54
Brown Advisory Maryland Bond Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Maryland Bond Fund – Investor Shares (the “Fund”) increased 1.13% in value. During the same period, the Bloomberg Barclays 1-10 Year Blended Municipal Bond Index (the “Index”), the Fund’s benchmark, increased 1.55%.
The Fund modestly underperformed on a relative basis during the second half of 2018 as municipal bonds benefitted from a flight-to-quality rally in interest rates. High-quality, fixed rate municipal yields followed U.S. Treasury yields sharply lower in late November and into December after reaching near-term peaks earlier in the fourth quarter. Worries about a trade war, ongoing Fed rate hikes, and concerns about slowing global economic growth fueled risk asset volatility; this ultimately benefitted high-grade municipals. Our defensive floating-rate positions and credit overweight detracted from relative returns for the period as AAA-rated bonds outperformed.
High-quality duration led muni market performance during the fourth quarter with 10-year and longer AAA-rated muni yields falling 50 basis points in November and December as an economic growth scare flattened the U.S. Treasury curve. A somewhat weaker macro outlook hurt the performance of more cyclically sensitive assets like corporate bonds, but municipals generally performed well. Municipal credit spreads drifted wider during the second half of the year; however, unlike corporate credit, BBB-and-lower rated municipal securities produced positive absolute returns. We believe that late-cycle dynamics and geopolitical uncertainty has the potential to continue driving demand for stable assets, including municipal bonds. Municipal credit has been called a “late-cycle haven” due to the low correlation to corporate earnings, broad sector diversification and generally longer economic cycle. We agree with this assessment, and believe that the recent spread widening may enhance investors’ ability to generate alpha through active credit selection.
Away from credit, we also see alpha opportunities in active yield curve positioning. While high-quality, long-duration municipals performed best in the fourth quarter, municipal/Treasury yield ratios remain elevated and stubbornly low yields on the front-end of the curve provide continued value out the curve. The relative steepness of the municipal curve led us to modestly increase duration during the quarter through the addition of higher-quality 15-20 year bonds.
We paired this with our continued sizeable overweight in ultra-short floating-rate and short-callable municipals. The front-end of our relative barbell proved invaluable this year, generating above market returns of +6.00%. Many of our muni floating-rate holdings are spread off of three-month London Interbank Offered Rate, a benchmark rate that represents the interest rate at which banks offer to lend to one another in the international market for short-term loans, which increased further in 2018, and has remained elevated compared to short-term U.S. Treasury and short fixed-rate municipal yields. The beauty of this barbell is that both “wings” have out-yielded the benchmark, effectively eliminating the need (or risk) of a timing decision. We believe that we can continue underweighting bonds with poor relative valuations in the middle of the intermediate yield curve–without sacrificing yield–while we wait for better opportunities.
Finding the right balance of risk and reward at this point in the market cycle requires a disciplined process, an open mind and discerning analysis. We are benchmark-aware, but not benchmark-beholden. We believe that our use of non-benchmark securities, like municipal floating-rate bonds, may offer a better return profile. We believe that our approach to fundamental research and risk management has the potential to continue providing opportunities for both principal stability and upside potential in a wide variety of economic scenarios.
Sincerely,
Stephen M. Shutz, CFA
Portfolio Manager
55
Brown Advisory Maryland Bond Fund
A Message to Our Shareholders
December 31, 2018
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. Credit Quality weights by rating are derived from the highest bond rating as determined by Standard & Poor’s (“S&P”), Moody’s or Fitch. Bond ratings are grades given to bonds that indicate their credit quality as determined by private independent rating services such as S&P, Moody’s and Fitch. These firms evaluate 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 none of the three rating agencies have issued a formal rating, the Advisor will classify the security as nonrated.
Definitions for terms and indices are provided in the Glossary of Terms.
56
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Municipal Bonds — 98.2% | |||||||||||||
General Obligation Bonds — 24.9% | |||||||||||||
2,225,000 | Anne Arundel County Maryland | 5.00 | % | 04/01/2022 | 2,446,877 | ||||||||
1,265,000 | Anne Arundel County Maryland | 5.00 | % | 10/01/2026 | 1,492,788 | ||||||||
1,115,000 | Baltimore County Maryland | 5.00 | % | 03/01/2026 | 1,329,727 | ||||||||
1,000,000 | Baltimore County Maryland | 5.00 | % | 08/01/2030 | 1,140,000 | ||||||||
1,970,000 | Charles County Maryland | 5.00 | % | 11/01/2021 | 2,142,986 | ||||||||
1,145,000 | Easton, Town of Maryland | 4.00 | % | 02/01/2021 | 1,196,376 | ||||||||
1,085,000 | Maryland National Capital Park & Planning Commission | 5.00 | % | 01/15/2020 | 1,121,174 | ||||||||
1,255,000 | Maryland State | 5.00 | % | 06/01/2023 | 1,419,995 | ||||||||
1,945,000 | Maryland State | 5.00 | % | 08/01/2023 | 2,154,710 | ||||||||
3,145,000 | Maryland State | 5.00 | % | 08/01/2023 | 3,570,487 | ||||||||
2,400,000 | Maryland State | 5.00 | % | 08/01/2024 | 2,782,320 | ||||||||
3,000,000 | Montgomery County Maryland | 5.00 | % | 12/01/2019 | 3,087,990 | ||||||||
5,000,000 | Montgomery County Maryland | 5.00 | % | 11/01/2023 | 5,706,700 | ||||||||
3,320,000 | Prince George’s County Maryland | 5.00 | % | 09/15/2026 | 3,596,855 | ||||||||
5,000,000 | Prince George’s County Maryland | 4.00 | % | 07/15/2037 | 5,271,650 | ||||||||
1,940,000 | Wicomico County Maryland | 4.00 | % | 11/01/2019 | 1,975,521 | ||||||||
1,985,000 | Wicomico County Maryland | 4.00 | % | 11/01/2020 | 2,063,130 | ||||||||
2,040,000 | Wicomico County Maryland | 4.00 | % | 11/01/2021 | 2,159,666 | ||||||||
44,658,952 | |||||||||||||
Revenue Bonds — 73.3% | |||||||||||||
3,480,000 | Austin, Texas | 7.88 | % | 09/01/2026 | 3,701,084 | ||||||||
1,000,000 | Baltimore, Maryland | 5.00 | % | 07/01/2028 | 1,176,180 | ||||||||
1,320,000 | Baltimore, Maryland | 5.00 | % | 07/01/2028 | 1,559,884 | ||||||||
520,000 | Baltimore, Maryland | 5.00 | % | 06/15/2030 | 571,646 | ||||||||
2,255,000 | Baltimore, Maryland | 5.00 | % | 09/01/2031 | 2,532,072 | ||||||||
1,000,000 | Baltimore, Maryland | 5.00 | % | 07/01/2032 | 1,124,190 | ||||||||
670,000 | Baltimore, Maryland | 5.00 | % | 06/15/2033 | 729,864 | ||||||||
1,150,000 | Baltimore, Maryland | 5.00 | % | 09/01/2033 | 1,284,699 | ||||||||
2,350,000 | Baltimore, Maryland | 5.00 | % | 09/01/2039 | 2,546,577 | ||||||||
1,000,000 | Denver County Colorado | 5.00 | % | 10/01/2032 | 1,052,480 | ||||||||
1,550,000 | Franklin County Ohio | 5.00 | % | 11/15/2034 | 1,625,314 | ||||||||
1,000,000 | Frederick County Maryland^ | 5.00 | % | 09/01/2027 | 1,088,560 | ||||||||
3,975,000 | Frederick County Maryland^ | 5.00 | % | 09/01/2032 | 4,266,367 | ||||||||
1,110,000 | Frederick County Maryland^ | 5.00 | % | 09/01/2037 | 1,168,908 | ||||||||
2,260,000 | Frederick County Maryland | 5.50 | % | 07/01/2040 | 2,331,258 | ||||||||
1,000,000 | Gaithersburg, City of Maryland | 5.00 | % | 01/01/2028 | 1,100,360 | ||||||||
1,000,000 | Gaithersburg, City of Maryland | 5.00 | % | 01/01/2033 | 1,087,750 | ||||||||
5,000,000 | Health & Educational Facilities Authority of the State of Missouri# | 3.17 | % | 06/01/2020 | 5,000,000 | ||||||||
2,000,000 | Lancaster County Pennsylvania Hospital Authority | 5.00 | % | 07/01/2035 | 2,077,440 | ||||||||
1,000,000 | Maryland Community Development Administration | 3.25 | % | 03/01/2036 | 964,160 | ||||||||
1,025,000 | Maryland Economic Development Corp.# | 2.55 | % | 12/01/2025 | 1,022,028 | ||||||||
5,000,000 | Maryland Economic Development Corp. | 5.00 | % | 06/01/2026 | 5,354,950 | ||||||||
700,000 | Maryland Economic Development Corp. | 5.00 | % | 06/01/2027 | 744,912 | ||||||||
400,000 | Maryland Economic Development Corp. | 5.00 | % | 07/01/2027 | 429,928 | ||||||||
850,000 | Maryland Economic Development Corp. | 5.00 | % | 07/01/2031 | 913,274 | ||||||||
2,300,000 | Maryland Economic Development Corp. | 5.75 | % | 06/01/2035 | 2,426,983 | ||||||||
4,500,000 | Maryland Economic Development Corp. | 4.50 | % | 07/01/2044 | 4,524,030 | ||||||||
3,000,000 | Maryland Stadium Authority | 5.00 | % | 05/01/2030 | 3,462,330 | ||||||||
1,000,000 | Maryland State Department of Transportation | 5.00 | % | 12/15/2020 | 1,061,040 | ||||||||
1,055,000 | Maryland State Department of Transportation | 4.00 | % | 05/15/2022 | 1,128,681 | ||||||||
1,715,000 | Maryland State Department of Transportation | 5.00 | % | 10/01/2027 | 2,051,123 | ||||||||
1,015,000 | Maryland State Health & Higher Educational Facilities | 4.00 | % | 07/01/2019 | 1,025,739 | ||||||||
485,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2023 | 520,357 | ||||||||
500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 08/15/2023 | 561,830 |
The accompanying notes are an integral part of these financial statements.
57
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par | ||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | ||||||||
Municipal Bonds — 98.2% (Continued) | ||||||||||||
Revenue Bonds — 73.3% (Continued) | ||||||||||||
500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2024 | 539,665 | |||||||
1,450,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2025 | 1,647,780 | |||||||
1,500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2025 | 1,713,855 | |||||||
1,060,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2025 | 1,157,435 | |||||||
1,000,000 | Maryland State Health & Higher Educational Facilities | 6.00 | % | 07/01/2025 | 1,084,630 | |||||||
420,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2026 | 484,487 | |||||||
2,500,000 | Maryland State Health & Higher Educational Facilities | 5.25 | % | 07/01/2026 | 2,818,050 | |||||||
1,605,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2028 | 1,796,669 | |||||||
3,500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2029 | 4,072,775 | |||||||
100,000 | Maryland State Health & Higher Educational Facilities | 4.00 | % | 10/01/2030 | 105,399 | |||||||
1,130,000 | Maryland State Health & Higher Educational Facilities | 6.25 | % | 07/01/2031 | 1,223,869 | |||||||
300,000 | Maryland State Health & Higher Educational Facilities | 4.00 | % | 10/01/2031 | 315,549 | |||||||
1,070,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2032 | 1,183,944 | |||||||
250,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 06/01/2033 | 276,693 | |||||||
1,250,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 08/15/2033 | 1,389,463 | |||||||
1,955,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2034 | 2,179,278 | |||||||
15,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2034 | 15,175 | |||||||
200,000 | Maryland State Health & Higher Educational Facilities | 4.50 | % | 07/01/2035 | 200,178 | |||||||
430,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 06/01/2036 | 470,889 | |||||||
1,200,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2037 | 1,331,280 | |||||||
1,500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2038 | 1,610,175 | |||||||
3,400,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 05/15/2040 | 3,545,214 | |||||||
1,310,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2043 | 1,394,521 | |||||||
4,255,000 | Maryland State Transportation Authority | 5.00 | % | 03/01/2022 | 4,635,823 | |||||||
1,000,000 | Maryland State Transportation Authority | 5.00 | % | 06/01/2022 | 1,084,650 | |||||||
4,420,000 | Maryland State Transportation Authority | 5.00 | % | 07/01/2028 | 5,290,873 | |||||||
2,525,000 | Maryland Water Quality Financing Administration | 5.00 | % | 03/01/2020 | 2,618,551 | |||||||
5,000,000 | Massachusetts Port Authority# | 4.99 | % | 01/01/2031 | 5,000,000 | |||||||
1,185,000 | New Hope Texas Cultural Education Facilities Finance Corp. | 5.75 | % | 07/01/2051 | 1,266,694 | |||||||
4,000,000 | New York Transportation Development Corp. | 5.00 | % | 08/01/2026 | 4,175,680 | |||||||
2,000,000 | Newport News Virginia Economic Development Authority | 5.00 | % | 12/01/2031 | 2,102,400 | |||||||
2,000,000 | North Carolina Medical Care Commission | 5.00 | % | 10/01/2031 | 2,104,720 | |||||||
1,005,000 | Prince William County Virginia Industrial Development Authority | 5.00 | % | 01/01/2023 | 1,070,777 | |||||||
1,000,000 | St Mary’s College of Maryland | 4.00 | % | 09/01/2024 | 1,094,180 | |||||||
4,335,000 | University System of Maryland | 5.00 | % | 04/01/2022 | 4,762,951 | |||||||
3,280,000 | Washington State Housing Finance Commission^ | 4.00 | % | 01/01/2026 | 3,337,990 | |||||||
131,318,260 | ||||||||||||
Total Municipal Bonds (Cost $176,205,878) | 175,977,212 | |||||||||||
Short-Term Investments — 0.6% | ||||||||||||
Money Market Fund — 0.6% | ||||||||||||
962,696 | First American Government Obligations Fund — Class Z, 2.32%* | 962,696 | ||||||||||
Total Short-Term Investments (Cost $962,696) | 962,696 | |||||||||||
Total Investments — 98.8% (Cost $177,168,574) | 176,939,908 | |||||||||||
Other Assets in Excess of Liabilities — 1.2% | 2,207,146 | |||||||||||
NET ASSETS — 100.0% | $ | 179,147,054 |
# | Variable rate security. Rate disclosed is as of December 31, 2018. |
* | Annualized seven-day yield as of December 31, 2018. |
^ | 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, 2018, the value of these securities amounted to $9,861,825 or 5.5% of net assets. |
The accompanying notes are an integral part of these financial statements.
58
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
Revenue Bonds | 73.3% |
General Obligation Bonds | 24.9% |
Money Market Funds | 0.6% |
Other Assets and Liabilities | 1.2% |
100.0% |
The accompanying notes are an integral part of these financial statements.
59
Brown Advisory Tax-Exempt Bond Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Tax-Exempt Bond Fund – Investor Shares (the “Fund”) increased 1.36% in value. During the same period, the Bloomberg Barclays 1-10 Year Blended Municipal Bond Index (the “Index”), the Fund’s benchmark, increased 1.55%.
The Fund modestly underperformed on a relative basis during the second half of 2018 as municipal bonds benefitted from a flight-to-quality rally in interest rates. High-quality, fixed rate municipal yields followed U.S. Treasury yields sharply lower in late-November and December after reaching near-term peaks earlier in the fourth quarter. Worries about a trade war, ongoing Fed rate hikes and concerns about slowing global economic growth fueled risk asset volatility; this ultimately benefitted high-grade municipals. Our defensive floating-rate positions and credit overweight detracted from relative returns for the period as AAA-rated bonds outperformed.
High-quality duration led muni market performance during the fourth quarter with 10-year and longer AAA-rated muni yields falling 50 basis points in November and December as an economic growth scare flattened the U.S. Treasury curve. A somewhat weaker macro outlook hurt the performance of more cyclically sensitive assets like corporate bonds, but municipal securities generally performed well. Municipal credit spreads drifted wider during the second half of the year; however, unlike corporate credit, BBB- and lower-rated municipals produced positive absolute returns. We believe that late-cycle dynamics and geopolitical uncertainty will continue driving demand for stable assets, including municipal bonds. Municipal credit has been called a “late-cycle haven” due to the low correlation to corporate earnings, broad sector diversification and generally longer economic cycle. We agree with this assessment, and believe that the recent spread widening has the potential to enhance investors’ ability to generate alpha through active credit selection.
Away from credit, we also see alpha opportunities in active yield curve positioning. While high-quality, long-duration municipals performed best in the fourth quarter, municipal/Treasury yield ratios remain elevated and stubbornly low yields on the front-end of the curve provide continued value out the curve. The relative steepness of the muni curve led us to modestly increase duration during the quarter through the addition of higher-quality 15-20 year bonds.
We paired this with our continued sizeable overweight in ultra-short floating-rate and short-callable municipal securities. The front-end of our relative barbell proved invaluable this year, generating above-market returns of +4.30%. Many of our floating-rate municipal holdings are spread off of three-month LIBOR, which increased further in 2018 and has remained elevated compared to short-term U.S. Treasuries and short fixed-rate municipal yields. The beauty of this barbell is that both “wings” have out-yielded the benchmark, effectively eliminating the need (or risk) of a timing decision. We believe that we can continue underweighting bonds with poor relative valuations in the middle of the intermediate yield curve–without sacrificing yield–while we wait for better opportunities.
Finding the right balance of risk and reward at this point in the market cycle requires a disciplined process, an open mind and discerning analysis. We are benchmark-aware, but not benchmark-beholden. We believe that our use of non-benchmark securities, like floating-rate municipal bonds, can offer a better return profile. We believe that our approach to fundamental research and risk management has the potential to continue providing opportunities for both principal stability and upside potential in a wide variety of economic scenarios.
Sincerely,
Stephen M. Shutz, CFA
Portfolio Manager
60
Brown Advisory Tax-Exempt Bond Fund
A Message to Our Shareholders
December 31, 2018
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.
Credit Quality weights by rating are derived from the highest bond rating as determined by Standard & Poor’s (“S&P”), Moody’s or Fitch. Bond ratings are grades given to bonds that indicate their credit quality as determined by private independent rating services such as S&P, Moody’s and Fitch. These firms evaluate 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 none of the three rating agencies have issued a formal rating, the Advisor will classify the security as nonrated.
Definitions for terms and indices are provided in the Glossary of Terms.
61
Brown Advisory Tax-Exempt Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Municipal Bonds — 98.2% | ||||||||||||
General Obligation Bonds — 9.1% | ||||||||||||
2,350,000 | Baltimore County Maryland | 4.00 | % | 03/01/2034 | 2,525,240 | |||||||
11,425,000 | Clark County Nevada | 4.00 | % | 12/01/2035 | 12,056,574 | |||||||
11,000,000 | Clark County Nevada | 4.00 | % | 12/01/2036 | 11,560,560 | |||||||
4,775,000 | Clark County Nevada School District | 5.00 | % | 06/15/2032 | 5,547,118 | |||||||
1,750,000 | Connecticut, State of | 4.00 | % | 06/15/2036 | 1,777,545 | |||||||
1,700,000 | Connecticut, State of | 4.00 | % | 06/15/2037 | 1,720,009 | |||||||
2,210,000 | Florida, State of | 4.00 | % | 06/01/2031 | 2,416,149 | |||||||
6,235,000 | Mississippi, State of | 4.00 | % | 10/01/2035 | 6,530,103 | |||||||
2,905,000 | Oceanside Unified California School District+ | 4.09 | % | 08/01/2042 | 1,147,126 | |||||||
1,675,000 | Oceanside Unified California School District+ | 4.10 | % | 08/01/2043 | 632,798 | |||||||
1,365,000 | Rosemont, Village of Illinois | 5.00 | % | 12/01/2025 | 1,546,968 | |||||||
5,315,000 | Victor Valley California Union High School District+ | 3.71 | % | 08/01/2035 | 2,917,988 | |||||||
3,340,000 | West Contra Costa California Unified School District | 4.00 | % | 08/01/2038 | 3,510,941 | |||||||
3,060,000 | West Contra Costa California Unified School District | 4.00 | % | 08/01/2038 | 3,216,611 | |||||||
57,105,730 | ||||||||||||
Revenue Bonds — 89.1% | ||||||||||||
1,285,000 | Arizona Sports & Tourism Authority | 5.00 | % | 07/01/2028 | 1,370,543 | |||||||
1,500,000 | Arlington, Texas | 5.00 | % | 02/15/2037 | 1,723,500 | |||||||
4,500,000 | Austin, Texas | 7.88 | % | 09/01/2026 | 4,785,885 | |||||||
8,450,000 | California Health Facilities Financing Authority# | 3.35 | % | 11/01/2033 | 8,450,000 | |||||||
8,300,000 | Cedar Rapids, City of Iowa# | 3.35 | % | 08/15/2032 | 8,300,000 | |||||||
2,970,000 | Central Texas Turnpike System | 5.00 | % | 08/15/2027 | 3,273,237 | |||||||
2,615,000 | Chattanooga Tennessee Health Educational & Housing Facility Board | 5.25 | % | 01/01/2040 | 2,797,292 | |||||||
6,330,000 | Chicago O’Hare International Airport | 5.00 | % | 01/01/2033 | 6,997,878 | |||||||
1,000,000 | Colorado Health Facilities Authority | 5.00 | % | 06/01/2027 | 1,106,610 | |||||||
1,300,000 | Colorado Health Facilities Authority | 5.00 | % | 12/01/2027 | 1,401,725 | |||||||
6,600,000 | Colorado Health Facilities Authority | 5.50 | % | 07/01/2034 | 6,713,388 | |||||||
5,965,000 | Colorado Health Facilities Authority | 5.00 | % | 12/01/2035 | 6,442,677 | |||||||
5,000,000 | Commonwealth Financing Authority | 5.00 | % | 06/01/2025 | 5,701,150 | |||||||
2,095,000 | Connecticut Special Tax Revenue | 5.00 | % | 08/01/2031 | 2,313,110 | |||||||
4,390,000 | Cumberland County Pennsylvania Municipal Authority | 4.00 | % | 01/01/2033 | 4,320,638 | |||||||
2,500,000 | Delaware State Health Facilities Authority | 5.00 | % | 06/01/2034 | 2,754,450 | |||||||
15,000,000 | Delaware Valley Pennsylvania Regional Finance Authority (3 Month LIBOR USD + 0.75%) | 2.59 | % | 06/01/2037 | 13,544,700 | |||||||
9,440,000 | Delaware Valley Pennsylvania Regional Finance Authority (3 Month LIBOR USD + 0.65%) | 2.49 | % | 06/01/2027 | 9,167,656 | |||||||
5,500,000 | Denver Colorado Airport System Revenue | 5.00 | % | 12/01/2034 | 6,589,440 | |||||||
9,150,000 | Denver Colorado Airport System Revenue | 5.00 | % | 12/01/2036 | 11,046,612 | |||||||
1,100,000 | Denver Colorado Convention Center Hotel Authority | 5.00 | % | 12/01/2028 | 1,231,956 | |||||||
9,000,000 | Detroit Michigan Sewage Disposal System (3 Month LIBOR USD + 0.60%) | 2.21 | % | 07/01/2032 | 8,603,460 | |||||||
7,900,000 | District of Columbia# | 6.55 | % | 08/01/2037 | 7,900,000 | |||||||
5,000,000 | District of Columbia# | 6.71 | % | 08/01/2038 | 5,000,000 | |||||||
5,175,000 | District of Columbia# | 6.55 | % | 08/01/2038 | 5,175,000 | |||||||
1,700,000 | Educational Enhancement Funding Corp. | 5.00 | % | 06/01/2023 | 1,850,450 | |||||||
12,095,000 | Florida’s Turnpike Enterprise | 4.00 | % | 07/01/2039 | 12,530,420 | |||||||
10,000,000 | Golden State Tobacco Securitization Corp. | 5.00 | % | 06/01/2031 | 10,999,900 | |||||||
2,500,000 | Golden State Tobacco Securitization Corp. | 5.00 | % | 06/01/2032 | 2,739,575 | |||||||
6,500,000 | Grand Forks County North Dakota^ | 5.00 | % | 09/15/2028 | 6,228,430 | |||||||
1,000,000 | Hamilton County Ohio Convention Facilities Authority | 5.00 | % | 12/01/2033 | 1,096,420 | |||||||
8,500,000 | Harris County Texas Cultural Education Facilities Finance Corp. | 5.50 | % | 10/01/2039 | 8,681,475 | |||||||
10,000,000 | Harris County Texas (3 Month LIBOR USD + 0.67%) | 2.42 | % | 08/15/2035 | 9,139,900 | |||||||
4,925,000 | Hawaii Department of Budget & Finance | 6.50 | % | 07/01/2039 | 5,024,633 | |||||||
1,400,000 | Henrico County Virginia Economic Development Authority# | 4.17 | % | 08/23/2027 | 1,400,000 | |||||||
6,645,000 | Houston Texas Combined Utility System Revenue | 5.00 | % | 11/15/2035 | 7,594,903 | |||||||
14,925,000 | Houston, City of Texas# | 3.35 | % | 09/01/2033 | 14,925,000 | |||||||
5,425,000 | Houston, City of Texas# | 3.35 | % | 09/01/2033 | 5,425,000 | |||||||
6,070,000 | Imperial California Irrigation District Electric System Revenue | 4.00 | % | 11/01/2037 | 6,345,517 |
The accompanying notes are an integral part of these financial statements.
62
Brown Advisory Tax-Exempt Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Municipal Bonds — 98.2% (Continued) | ||||||||||||
Revenue Bonds — 89.1% (Continued) | ||||||||||||
1,000,000 | Indiana Finance Authority | 5.00 | % | 09/15/2025 | 1,100,170 | |||||||
1,750,000 | Indiana Finance Authority | 5.00 | % | 09/15/2028 | 1,907,150 | |||||||
10,000,000 | Kentucky Asset Liability Commission (3 Month LIBOR USD + 0.55%) | 2.25 | % | 11/01/2025 | 9,742,200 | |||||||
1,250,000 | Kentucky Economic Development Finance Authority | 5.00 | % | 05/01/2024 | 1,260,900 | |||||||
3,000,000 | Lancaster County Pennsylvania Hospital Authority | 5.00 | % | 07/01/2035 | 3,116,160 | |||||||
2,280,000 | Las Vegas Nevada Redevelopment Agency | 5.00 | % | 06/15/2028 | 2,590,513 | |||||||
5,235,000 | Lees Summit Missouri Industrial Development Authority | 5.25 | % | 08/15/2039 | 5,323,733 | |||||||
2,000,000 | Louisiana Public Facilities Authority | 3.50 | % | 06/01/2030 | 1,977,680 | |||||||
1,000,000 | Louisiana Public Facilities Authority | 5.00 | % | 06/01/2036 | 1,115,210 | |||||||
985,000 | Lower Colorado River Texas Authority | 5.50 | % | 05/15/2036 | 996,475 | |||||||
10,000,000 | Lower Colorado River Texas Authority | 5.50 | % | 05/15/2036 | 10,116,500 | |||||||
5,030,000 | Maryland Health & Higher Educational Facilities Authority | 5.50 | % | 01/01/2036 | 5,730,025 | |||||||
2,015,000 | Massachusetts Health & Educational Facilities Authority# | 6.83 | % | 07/01/2023 | 2,005,207 | |||||||
6,100,000 | Massachusetts Health & Educational Facilities Authority# | 4.99 | % | 07/01/2023 | 6,100,000 | |||||||
1,300,000 | Massachusetts Health & Educational Facilities Authority# | 5.75 | % | 07/01/2023 | 1,300,000 | |||||||
150,000 | Massachusetts Health & Educational Facilities Authority | 5.00 | % | 10/01/2024 | 150,399 | |||||||
1,150,000 | Massachusetts Health & Educational Facilities Authority | 6.25 | % | 11/15/2032 | 1,168,791 | |||||||
975,000 | Massachusetts Municipal Wholesale Electric Co.# | 4.13 | % | 07/01/2019 | 975,000 | |||||||
9,525,000 | Massachusetts Port Authority# | 4.99 | % | 01/01/2031 | 9,525,000 | |||||||
1,895,000 | Miami Beach Florida Health Facilities | 5.00 | % | 11/15/2029 | 2,053,233 | |||||||
6,135,000 | Miami-Dade County Florida Water & Sewer System Revenue | 4.00 | % | 10/01/2035 | 6,397,026 | |||||||
4,700,000 | Minneapolis & St. Paul, Minnesota Housing & Redevelopment Authority# | 3.59 | % | 08/01/2027 | 4,700,000 | |||||||
1,450,000 | Minneapolis & St. Paul, Minnesota Housing & Redevelopment Authority# | 3.54 | % | 08/01/2028 | 1,450,000 | |||||||
5,000,000 | Mission Texas Economic Development Corp.^ | 4.63 | % | 10/01/2031 | 5,095,850 | |||||||
10,000,000 | Missouri State Environmental Improvement & Energy Resources Authority# | 2.98 | % | 09/01/2033 | 10,000,000 | |||||||
20,000,000 | Missouri State Environmental Improvement & Energy Resources Authority# | 3.05 | % | 09/01/2033 | 20,000,000 | |||||||
10,000,000 | Missouri State Environmental Improvement & Energy Resources Authority# | 3.20 | % | 09/01/2033 | 10,000,000 | |||||||
3,565,000 | Montgomery County Ohio | 5.00 | % | 05/01/2039 | 3,587,388 | |||||||
1,600,000 | Mountain House California Public Financing Authority | 5.00 | % | 12/01/2027 | 1,604,064 | |||||||
2,565,000 | Mountain House California Public Financing Authority | 5.00 | % | 12/01/2032 | 2,570,643 | |||||||
1,000,000 | New Hope Texas Cultural Education Facilities Finance Corp. | 5.00 | % | 04/01/2029 | 1,059,930 | |||||||
1,080,000 | New Hope Texas Cultural Education Facilities Finance Corp. | 5.00 | % | 07/01/2031 | 1,137,186 | |||||||
1,750,000 | New Hope Texas Cultural Education Facilities Finance Corp. | 5.25 | % | 07/01/2036 | 1,839,530 | |||||||
1,250,000 | New Hope Texas Cultural Education Facilities Finance Corp. | 5.50 | % | 07/01/2046 | 1,324,700 | |||||||
1,000,000 | New Hope Texas Cultural Education Facilities Finance Corp. | 5.75 | % | 07/01/2051 | 1,068,940 | |||||||
10,390,000 | New York City Industrial Development Agency# | 3.64 | % | 10/01/2029 | 10,390,000 | |||||||
2,375,000 | New York City Industrial Development Agency | 5.00 | % | 01/01/2039 | 2,406,041 | |||||||
3,000,000 | New York City Industrial Development Agency | 5.00 | % | 01/01/2046 | 3,042,030 | |||||||
3,375,000 | Newport News Virginia Economic Development Authority | 5.00 | % | 12/01/2031 | 3,547,800 | |||||||
1,760,000 | Niagara County New York Tobacco Asset Securitization Corp. | 5.00 | % | 05/15/2024 | 1,927,746 | |||||||
2,000,000 | North Carolina Medical Care Commission | 5.00 | % | 10/01/2031 | 2,104,720 | |||||||
3,765,000 | North Carolina Turnpike Authority+ | 3.81 | % | 01/01/2034 | 2,160,056 | |||||||
4,165,000 | North Texas Tollway Authority | 5.00 | % | 01/01/2032 | 4,643,100 | |||||||
5,000,000 | North Texas Tollway Authority | 5.25 | % | 01/01/2044 | 5,011,550 | |||||||
5,950,000 | Ohio Air Quality Development Authority^ | 3.75 | % | 01/15/2028 | 5,931,853 | |||||||
3,790,000 | Oregon State Facilities Authority | 5.00 | % | 10/01/2031 | 4,254,502 | |||||||
10,000,000 | Oregon State Housing & Community Services Department# | 1.35 | % | 07/01/2043 | 10,000,000 | |||||||
1,250,000 | Palm Beach County Florida Health Facilities Authority | 5.00 | % | 12/01/2031 | 1,361,838 | |||||||
1,000,000 | Park Creek Colorado Metropolitan District | 5.00 | % | 12/01/2034 | 1,100,370 | |||||||
1,535,000 | Pennsylvania Economic Development Financing Authority | 5.00 | % | 11/01/2027 | 1,650,355 | |||||||
10,000,000 | Pennsylvania Turnpike Commission | 5.00 | % | 06/01/2029 | 11,214,000 | |||||||
1,000,000 | Pennsylvania Turnpike Commission | 5.00 | % | 12/01/2034 | 1,126,180 | |||||||
6,360,000 | Pennsylvania Turnpike Commission | 4.00 | % | 12/01/2036 | 6,513,276 | |||||||
8,350,000 | Pinellas County Florida Health Facilities Authority# | 3.63 | % | 11/15/2023 | 8,350,000 | |||||||
1,110,000 | Prince William County Virginia Industrial Development Authority | 5.00 | % | 01/01/2025 | 1,197,457 |
The accompanying notes are an integral part of these financial statements.
63
Brown Advisory Tax-Exempt Bond Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par | ||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | ||||||||
Municipal Bonds — 98.2% (Continued) | ||||||||||||
Revenue Bonds — 89.1% (Continued) | ||||||||||||
3,120,000 | Prince William County Virginia Industrial Development Authority | 5.00 | % | 01/01/2031 | 3,309,758 | |||||||
1,500,000 | Public Finance Authority | 2.63 | % | 11/01/2025 | 1,453,725 | |||||||
1,500,000 | Public Finance Authority^ | 5.00 | % | 09/01/2030 | 1,552,185 | |||||||
6,960,000 | San Diego California Tobacco Settlement Revenue Funding Corp. | 4.00 | % | 06/01/2032 | 6,981,298 | |||||||
5,680,000 | Seattle Washington Municipal Light & Power Revenue | 4.00 | % | 01/01/2030 | 6,228,120 | |||||||
4,365,000 | Seattle Washington Municipal Light & Power Revenue | 4.00 | % | 01/01/2031 | 4,742,747 | |||||||
5,000,000 | Seattle Washington Municipal Light & Power Revenue | 4.00 | % | 01/01/2035 | 5,318,550 | |||||||
6,840,000 | Selma Alabama Industrial Development Board | 6.25 | % | 11/01/2033 | 7,055,392 | |||||||
2,250,000 | St. Louis County Missouri Industrial Development Authority | 5.00 | % | 11/15/2041 | 2,295,720 | |||||||
6,800,000 | Syracuse New York Industrial Development Agency# | 3.54 | % | 12/01/2029 | 6,800,000 | |||||||
2,055,000 | Tobacco Settlement Authority | 5.25 | % | 06/01/2032 | 2,162,209 | |||||||
10,000,000 | Tobacco Settlement Financing Corp. | 5.00 | % | 06/01/2031 | 11,202,100 | |||||||
2,405,000 | University of Connecticut | 5.00 | % | 03/15/2029 | 2,701,031 | |||||||
4,077,057 | Vermont Student Assistance Corp. (3 Month LIBOR USD + 3.00%) | 5.75 | % | 12/03/2035 | 4,266,274 | |||||||
5,755,000 | Virginia Public Building Authority | 4.00 | % | 08/01/2036 | 6,161,533 | |||||||
4,000,000 | Virginia Small Business Financing Authority | 5.00 | % | 07/01/2034 | 4,171,480 | |||||||
1,000,000 | Washington State Housing Finance Commission^ | 4.00 | % | 01/01/2026 | 1,017,680 | |||||||
2,655,000 | Washington State Housing Finance Commission^ | 5.00 | % | 01/01/2031 | 2,833,257 | |||||||
1,505,000 | Washoe, County of Nevada | 5.00 | % | 02/01/2043 | 1,508,883 | |||||||
1,610,000 | Wisconsin Health & Educational Facilities Authority | 5.00 | % | 05/01/2027 | 1,763,240 | |||||||
1,730,000 | Wisconsin Health & Educational Facilities Authority | 5.00 | % | 08/15/2028 | 1,887,430 | |||||||
650,000 | Wisconsin Health & Educational Facilities Authority | 5.00 | % | 09/15/2037 | 663,143 | |||||||
9,150,000 | Wisconsin Housing & Economic Development Authority# | 1.34 | % | 09/01/2039 | 9,150,000 | |||||||
1,010,000 | Yamhill County Oregon Hospital Authority | 4.00 | % | 11/15/2026 | 1,027,806 | |||||||
480,000 | Yamhill County Oregon Hospital Authority | 5.00 | % | 11/15/2031 | 513,773 | |||||||
460,000 | Yamhill County Oregon Hospital Authority | 5.00 | % | 11/15/2036 | 483,469 | |||||||
1,085,000 | Yamhill County Oregon Hospital Authority | 5.00 | % | 11/15/2046 | 1,123,463 | |||||||
557,089,273 | ||||||||||||
Total Municipal Bonds (Cost $613,283,984) | 614,195,003 | |||||||||||
Short-Term Investments — 0.3% | ||||||||||||
Money Market Funds — 0.3% | ||||||||||||
1,849,200 | First American Government Obligations Fund — Class Z, 2.32%* | 1,849,200 | ||||||||||
Total Short-Term Investments (Cost $1,849,200) | 1,849,200 | |||||||||||
Total Investments — 98.5% (Cost $615,133,184) | 616,044,203 | |||||||||||
Other Assets in Excess of Liabilities — 1.5% | 9,622,494 | |||||||||||
NET ASSETS — 100.0% | $ | 625,666,697 |
# | Variable rate security. Rate disclosed is as of December 31, 2018. |
* | Annualized seven-day yield as of December 31, 2018. |
^ | 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, 2018, the value of these securities amounted to $22,659,255 or 3.6% of net assets. |
+ | Zero coupon bond. Rate disclosed is calculated yield to maturity as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Revenue Bonds | 89.1% |
General Obligation Bonds | 9.1% |
Money Market Funds | 0.3% |
Other Assets and Liabilities | 1.5% |
100.0% |
The accompanying notes are an integral part of these financial statements.
64
Brown Advisory Mortgage Securities Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory Mortgage Securities Fund – Investor Shares (the “Fund”) increased 1.50%. During the same period, the Bloomberg Barclays Mortgage Backed Securities Index (the “Index”), the Fund’s benchmark, increased 1.96%.
The Fund aims to generate performance through strong current income generation from high-quality mortgage-related securities. The mortgage sector in particular is highly sensitive to interest rate volatility and assumptions around borrower refinancing behavior. Our disciplined process is supported by detailed individual security selection with a keen focus on capital preservation from these factors across all interest rate environments.
For the six-month period ended December 31, 2018, the Fund’s defensive positioning helped mute interest rate volatility. During the course of the period, the 10-year Treasury rose 37bps to 3.24% on November 8, before falling 56bps to end at 2.68%. In line with our expectations, the Fund outperformed during the selloff and underperformed during the rally. The sharp reversal in early November pushed lower-coupon mortgages, a sector to which we are purposefully underweight, to outperform. In this space, our team sees few opportunities to capitalize on individual security selection. Rather, we favor seasoned, higher-coupon pass-throughs and specific parts of the agency commercial mortgage market.
Outside of our agency holdings, we maintain an allocation to low-duration asset-backed securities and floating-rate securitized products. While we believe that these sectors help reduce our sensitivity to interest rates and offer compelling risk-adjusted return, we slightly reduced our exposure as we sold securities that had outperformed over the period.
Our objective for the Fund is to build a portfolio that we believe has the potential to be resilient to a wide variety of challenging markets. By seeking attractive income generation with stable prepayment profiles and fundamentally sound credits, we aim to deliver incremental return with the stability of a government-related mandate.
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.
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.
65
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 89.4% | ||||||||||||
1,200,000 | BBCMS Mortgage Trust, Series 2018-TALL C (1 Month LIBOR USD + 1.12%)^ | 3.58 | % | 03/16/2037 | 1,172,590 | |||||||
24,135 | FHLMC PC, Pool# M3-0034 | 4.00 | % | 12/01/2020 | 24,166 | |||||||
41,174 | FHLMC PC, Pool# G8-0074 | 7.75 | % | 12/17/2021 | 41,600 | |||||||
95,647 | FHLMC PC, Pool# Z6-0016 | 5.50 | % | 04/01/2023 | 101,058 | |||||||
2,923,309 | FHLMC PC, Pool# G1-6375 | 6.00 | % | 01/01/2024 | 3,032,919 | |||||||
23,189 | FHLMC PC, Pool# G8-0294 | 6.20 | % | 10/20/2027 | 24,274 | |||||||
55,923 | FHLMC PC, Pool# N3-0530 | 5.50 | % | 01/01/2029 | 55,584 | |||||||
435,405 | FHLMC PC, Pool# C4-6100 | 6.00 | % | 08/01/2029 | 475,507 | |||||||
121,320 | FHLMC PC, Pool# C5-3878 | 5.50 | % | 12/01/2030 | 130,046 | |||||||
47,639 | FHLMC PC, Pool# N5-0056 | 6.50 | % | 02/01/2031 | 49,835 | |||||||
316,539 | FHLMC PC, Pool# C9-1366 | 4.50 | % | 04/01/2031 | 330,951 | |||||||
15,945 | FHLMC PC, Pool# G8-0285 | 9.00 | % | 04/17/2031 | 17,416 | |||||||
66,473 | FHLMC PC, Pool# C6-6421 | 6.50 | % | 02/01/2032 | 72,168 | |||||||
36,569 | FHLMC PC, Pool# P0-0023 | 6.50 | % | 11/01/2032 | 39,051 | |||||||
238,644 | FHLMC PC, Pool# N7-0078 | 5.50 | % | 01/01/2033 | 249,301 | |||||||
134,048 | FHLMC PC, Pool# 1B-0889 (12 Month LIBOR USD + 1.59%) | 3.95 | % | 05/01/2033 | 140,377 | |||||||
737,961 | FHLMC PC, Pool# C7-9930 | 5.50 | % | 06/01/2033 | 797,011 | |||||||
813,472 | FHLMC PC, Pool# A1-2929 | 5.00 | % | 08/01/2033 | 869,591 | |||||||
183,813 | FHLMC PC, Pool# A1-4256 | 5.50 | % | 10/01/2033 | 198,958 | |||||||
371,673 | FHLMC PC, Pool# G3-0932 | 4.50 | % | 03/01/2034 | 388,571 | |||||||
896,973 | FHLMC PC, Pool# A3-0648 | 5.50 | % | 12/01/2034 | 965,441 | |||||||
69,724 | FHLMC PC, Pool# 1J-0204 (12 Month LIBOR USD + 1.75%) | 4.17 | % | 05/01/2035 | 73,121 | |||||||
185,967 | FHLMC PC, Pool# N7-0071 | 6.00 | % | 06/01/2035 | 196,101 | |||||||
100,609 | FHLMC PC, Pool# A4-6629 | 5.00 | % | 08/01/2035 | 106,877 | |||||||
1,345,046 | FHLMC PC, Pool# K9-3365 | 3.50 | % | 11/01/2035 | 1,362,492 | |||||||
1,018,692 | FHLMC PC, Pool# K9-3349 | 4.00 | % | 11/01/2035 | 1,051,110 | |||||||
158,980 | FHLMC PC, Pool# A3-9555 | 5.50 | % | 11/01/2035 | 172,101 | |||||||
43,570 | FHLMC PC, Pool# 1L-1263 (1 Year CMT Rate + 2.25%) | 4.10 | % | 03/01/2036 | 46,153 | |||||||
634,933 | FHLMC PC, Pool# G0-5935 | 6.00 | % | 03/01/2036 | 694,051 | |||||||
45,336 | FHLMC PC, Pool# 1H-1348 (1 Year CMT Rate + 2.14%) | 4.40 | % | 10/01/2036 | 47,670 | |||||||
375,194 | FHLMC PC, Pool# G2-0028 | 7.50 | % | 12/01/2036 | 410,417 | |||||||
109,746 | FHLMC PC, Pool# B3-1891 | 5.38 | % | 01/01/2037 | 115,639 | |||||||
262,203 | FHLMC PC, Pool# A5-6261 | 5.50 | % | 01/01/2037 | 283,664 | |||||||
171,766 | FHLMC PC, Pool# 84-7727 (12 Month LIBOR USD + 1.74%) | 4.54 | % | 02/01/2037 | 179,209 | |||||||
209,788 | FHLMC PC, Pool# B3-1900 | 5.38 | % | 02/01/2037 | 221,139 | |||||||
123,629 | FHLMC PC, Pool# B3-1934 | 5.38 | % | 04/01/2037 | 130,236 | |||||||
31,769 | FHLMC PC, Pool# A5-9109 | 7.50 | % | 04/01/2037 | 35,654 | |||||||
241,807 | FHLMC PC, Pool# B3-1976 | 5.10 | % | 05/01/2037 | 253,730 | |||||||
83,602 | FHLMC PC, Pool# B3-1950 | 5.10 | % | 05/01/2037 | 87,744 | |||||||
182,939 | FHLMC PC, Pool# A6-7884 | 5.38 | % | 05/01/2037 | 192,779 | |||||||
95,256 | FHLMC PC, Pool# 1J-1681 (12 Month LIBOR USD + 1.98%) | 4.61 | % | 06/01/2037 | 100,461 | |||||||
177,515 | FHLMC PC, Pool# B3-2000 | 5.10 | % | 06/01/2037 | 186,187 | |||||||
100,373 | FHLMC PC, Pool# U3-0471 | 5.10 | % | 07/01/2037 | 105,308 | |||||||
57,749 | FHLMC PC, Pool# U3-0653 | 5.13 | % | 07/01/2037 | 61,006 | |||||||
237,987 | FHLMC PC, Pool# U3-0681 | 5.10 | % | 09/01/2037 | 249,563 | |||||||
78,833 | FHLMC PC, Pool# U3-0606 | 5.10 | % | 09/01/2037 | 82,706 | |||||||
54,194 | FHLMC PC, Pool# 1G-2249 (12 Month LIBOR USD + 1.78%) | 4.65 | % | 10/01/2037 | 56,724 | |||||||
277,216 | FHLMC PC, Pool# T3-0346 | 5.38 | % | 10/01/2037 | 292,148 | |||||||
88,321 | FHLMC PC, Pool# U3-0800 | 5.10 | % | 11/01/2037 | 92,639 | |||||||
151,267 | FHLMC PC, Pool# U3-1874 | 5.38 | % | 04/01/2038 | 159,448 | |||||||
367,301 | FHLMC PC, Pool# N7-0082 | 6.00 | % | 07/01/2038 | 391,406 | |||||||
295,124 | FHLMC PC, Pool# G0-4540 | 6.00 | % | 08/01/2038 | 327,674 | |||||||
252,931 | FHLMC PC, Pool# G0-4655 | 6.00 | % | 08/01/2038 | 280,498 | |||||||
118,709 | FHLMC PC, Pool# U3-2470 | 5.10 | % | 11/01/2038 | 124,533 | |||||||
170,608 | FHLMC PC, Pool# G0-8348 | 5.00 | % | 06/01/2039 | 180,737 | |||||||
995,332 | FHLMC PC, Pool# A8-7915 | 5.00 | % | 08/01/2039 | 1,065,714 | |||||||
3,534,308 | FHLMC PC, Pool# G0-7058 | 6.00 | % | 09/01/2039 | 3,914,711 |
The accompanying notes are an integral part of these financial statements.
66
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 89.4% (Continued) | ||||||||||||
185,897 | FHLMC PC, Pool# G0-7053 | 5.00 | % | 10/01/2039 | 199,006 | |||||||
836,165 | FHLMC PC, Pool# G6-1330 | 6.00 | % | 07/01/2040 | 911,585 | |||||||
644,005 | FHLMC PC, Pool# Q3-8585 | 4.00 | % | 10/01/2043 | 661,958 | |||||||
574,205 | FHLMC PC, Pool# Q2-6108 | 5.00 | % | 05/01/2044 | 602,478 | |||||||
1,038,098 | FHLMC PC, Pool# G0-8828 | 5.50 | % | 04/01/2048 | 1,103,553 | |||||||
3,550,919 | FHLMC REMIC, Series 4318~ | 2.50 | % | 08/15/2022 | 119,156 | |||||||
13,908 | FHLMC REMIC, Series 2516 | 5.50 | % | 10/15/2022 | 14,215 | |||||||
3,229,251 | FHLMC REMIC, Series 4329~ | 2.50 | % | 01/15/2023 | 127,698 | |||||||
63,606 | FHLMC REMIC, Series 3571 | 4.00 | % | 09/15/2024 | 64,633 | |||||||
56,854 | FHLMC REMIC, Series 1843 | 7.00 | % | 04/15/2026 | 60,860 | |||||||
195,922 | FHLMC REMIC, Series 2517 | 5.50 | % | 10/15/2032 | 203,423 | |||||||
448,698 | FHLMC REMIC, Series 2890 | 5.00 | % | 11/15/2034 | 482,609 | |||||||
517,770 | FHLMC REMIC, Series 2986 | 5.00 | % | 06/15/2035 | 560,343 | |||||||
479,474 | FHLMC REMIC, Series 3150 | 5.50 | % | 05/15/2036 | 528,549 | |||||||
249,296 | FHLMC REMIC, Series 3294 | 5.50 | % | 03/15/2037 | 270,702 | |||||||
1,688,385 | FHLMC REMIC, Series 4309~ | 3.00 | % | 08/15/2039 | 191,110 | |||||||
188,074 | FHLMC REMIC, Series 3878 | 3.00 | % | 04/15/2041 | 189,198 | |||||||
1,450,000 | FHLMC SCRTT, Series 2016-1 M1#^ | 3.00 | % | 09/25/2055 | 1,405,113 | |||||||
984,564 | FHLMC SCRTT, Series 2017-1 HAʭ | 2.75 | % | 01/25/2056 | 958,487 | |||||||
1,000,000 | FHLMC SCRTT, Series 2017-1 M1#^ | 4.00 | % | 01/25/2056 | 977,006 | |||||||
1,758,721 | FHLMC SCRTT, Series 2017-2 HAʭ | 2.50 | % | 08/25/2056 | 1,729,133 | |||||||
518,500 | FHLMC WLST, Series 2017-SC02 2A1 | 3.50 | % | 05/25/2047 | 517,611 | |||||||
1,209,096 | FHMS, Series K-J13 A1 | 2.06 | % | 09/25/2021 | 1,199,713 | |||||||
31,603,094 | FHMS, Series K-016 X1#~ | 1.49 | % | 10/25/2021 | 1,108,460 | |||||||
13,954,820 | FHMS, Series K-019 X1#~ | 1.63 | % | 03/25/2022 | 613,687 | |||||||
1,561,305 | FHMS, Series K-J18 A1 | 2.46 | % | 03/25/2022 | 1,549,345 | |||||||
1,059,286 | FHMS, Series K-J16 A1 | 1.97 | % | 04/25/2022 | 1,040,861 | |||||||
321,907 | FHMS, Series K-J09 A1 | 2.02 | % | 04/25/2022 | 317,358 | |||||||
12,537,352 | FHMS, Series K-021 X1#~ | 1.44 | % | 06/25/2022 | 526,087 | |||||||
15,974,014 | FHMS, Series K-721 X1#~ | 0.33 | % | 08/25/2022 | 163,607 | |||||||
789,270 | FHMS, Series K-J07 A1 | 1.53 | % | 09/25/2022 | 771,009 | |||||||
25,847,454 | FHMS, Series K-025 X1#~ | 0.85 | % | 10/25/2022 | 709,825 | |||||||
21,947,338 | FHMS, Series K-030 X1#~ | 0.20 | % | 04/25/2023 | 165,452 | |||||||
305,013 | FHMS, Series K-J12 A1 | 2.38 | % | 04/25/2023 | 302,453 | |||||||
6,006,736 | FHMS, Series K-035 X1#~ | 0.40 | % | 08/25/2023 | 93,646 | |||||||
2,620,296 | FHMS, Series K-J14 A1 | 2.20 | % | 11/25/2023 | 2,572,809 | |||||||
6,110,000 | FHMS, Series K-725 A2 | 3.00 | % | 01/25/2024 | 6,122,007 | |||||||
30,937,143 | FHMS, Series K-C02 X1#~ | 0.37 | % | 03/25/2024 | 570,837 | |||||||
4,915,000 | FHMS, Series K-726 A2 | 2.91 | % | 04/25/2024 | 4,899,891 | |||||||
1,955,000 | FHMS, Series K-728 A2# | 3.06 | % | 08/25/2024 | 1,962,751 | |||||||
2,129,062 | FHMS, Series K-J17 A1 | 2.40 | % | 10/25/2024 | 2,105,695 | |||||||
3,000,000 | FHMS, Series K-729 A2 | 3.14 | % | 10/25/2024 | 3,023,045 | |||||||
172,096 | FHMS, Series K-J20 A1 | 3.21 | % | 10/25/2024 | 174,854 | |||||||
7,083,196 | FHMS, Series K-055 X1#~ | 1.37 | % | 03/25/2026 | 581,359 | |||||||
6,711,168 | FHMS, Series K-057 X1#~ | 1.19 | % | 07/25/2026 | 494,178 | |||||||
5,415,989 | FHMS, Series K-058 X1#~ | 0.93 | % | 08/25/2026 | 319,146 | |||||||
4,066,685 | FHMS, Series K-064 X1#~ | 0.61 | % | 03/25/2027 | 171,159 | |||||||
4,392,019 | FHMS, Series K-W03 X1#~ | 0.85 | % | 06/25/2027 | 236,271 | |||||||
4,310,696 | FHMS, Series Q-006 APT1# | 2.58 | % | 04/25/2028 | 4,557,833 | |||||||
3,343,427 | FHMS, Series Q-004 A2H# | 2.87 | % | 01/25/2046 | 3,343,688 | |||||||
2,097,578 | FHMS, Series Q-007 APT1# | 3.00 | % | 10/25/2047 | 2,134,276 | |||||||
27,996 | FNMA, Pool# 773482 | 4.50 | % | 08/01/2019 | 27,990 | |||||||
51,849 | FNMA, Pool# 922791 | 6.50 | % | 12/01/2021 | 52,212 | |||||||
32,258 | FNMA, Pool# 965546 | 5.50 | % | 01/01/2023 | 32,858 | |||||||
14,529 | FNMA, Pool# 934900 | 5.50 | % | 07/01/2024 | 14,612 | |||||||
85,949 | FNMA, Pool# AL1081 | 5.00 | % | 07/01/2025 | 87,265 | |||||||
60,151 | FNMA, Pool# 336422 (3 Year CMT Rate + 2.30%) | 3.87 | % | 10/01/2025 | 60,222 |
The accompanying notes are an integral part of these financial statements.
67
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 89.4% (Continued) | ||||||||||||
226,135 | FNMA, Pool# 344903 | 5.50 | % | 10/01/2025 | 241,390 | |||||||
120,300 | FNMA, Pool# 356232 | 6.50 | % | 01/01/2026 | 129,248 | |||||||
69,851 | FNMA, Pool# 890591 | 4.50 | % | 03/01/2026 | 72,134 | |||||||
47,406 | FNMA, Pool# 406521 (1 Year CMT Rate + 2.52%) | 4.65 | % | 05/01/2026 | 47,780 | |||||||
4,217,419 | FNMA, Pool# BM3352 | 2.55 | % | 12/01/2026 | 4,072,204 | |||||||
70,243 | FNMA, Pool# 356329 (1 Year CMT Rate + 2.64%) | 5.26 | % | 01/01/2027 | 71,609 | |||||||
1,023,411 | FNMA, Pool# AN4848 | 3.45 | % | 03/01/2027 | 1,040,743 | |||||||
828,475 | FNMA, Pool# AN4845 | 3.45 | % | 03/01/2027 | 845,836 | |||||||
47,438 | FNMA, Pool# 363850 (1 Year CMT Rate + 2.13%) | 3.98 | % | 04/01/2027 | 48,233 | |||||||
2,870,000 | FNMA, Pool# AN6558 | 2.91 | % | 09/01/2027 | 2,777,958 | |||||||
49,770 | FNMA, Pool# 406380 (1 Year CMT Rate + 2.17%) | 4.29 | % | 11/01/2027 | 50,241 | |||||||
2,000,000 | FNMA, Pool# AN7384 | 2.88 | % | 12/01/2027 | 1,927,244 | |||||||
1,921,000 | FNMA, Pool# AN7963 | 3.10 | % | 12/01/2027 | 1,873,764 | |||||||
1,049,392 | FNMA, Pool# AN0504 | 3.36 | % | 12/01/2027 | 1,045,059 | |||||||
1,120,000 | FNMA, Pool# AN1710 | 2.87 | % | 05/01/2028 | 1,089,048 | |||||||
1,242,613 | FNMA, Pool# 257203 | 5.00 | % | 05/01/2028 | 1,302,357 | |||||||
2,450,115 | FNMA, Pool# AM3724 | 3.08 | % | 06/01/2028 | 2,418,710 | |||||||
2,000,000 | FNMA, Pool# AN2738 | 2.39 | % | 09/01/2028 | 1,868,393 | |||||||
867,849 | FNMA, Pool# 957502 | 3.98 | % | 07/01/2029 | 893,522 | |||||||
51,071 | FNMA, Pool# 520478 (1 Year CMT Rate + 2.10%) | 4.60 | % | 11/01/2029 | 51,813 | |||||||
1,386,078 | FNMA, Pool# AM8082 | 2.92 | % | 02/01/2030 | 1,341,883 | |||||||
43,722 | FNMA, Pool# 559439 (1 Year CMT Rate + 2.27%) | 4.52 | % | 09/01/2030 | 44,533 | |||||||
57,713 | FNMA, Pool# 573097 (1 Year CMT Rate + 2.21%) | 4.71 | % | 02/01/2031 | 58,438 | |||||||
213,332 | FNMA, Pool# AL0898 | 5.00 | % | 02/01/2031 | 223,684 | |||||||
43,334 | FNMA, Pool# 590852 (1 Year CMT Rate + 2.11%) | 4.36 | % | 07/01/2031 | 43,684 | |||||||
65,037 | FNMA, Pool# 656181 (1 Year CMT Rate + 2.16%) | 4.09 | % | 08/01/2031 | 67,172 | |||||||
42,127 | FNMA, Pool# 723313 (1 Year CMT Rate + 2.54%) | 4.79 | % | 09/01/2031 | 42,405 | |||||||
25,345 | FNMA, Pool# 642122 (1 Year CMT Rate + 2.27%) | 4.15 | % | 03/01/2032 | 25,816 | |||||||
34,086 | FNMA, Pool# 628837 | 6.50 | % | 03/01/2032 | 37,076 | |||||||
44,464 | FNMA, Pool# 640225 (1 Year CMT Rate + 2.27%) | 4.15 | % | 04/01/2032 | 45,943 | |||||||
44,862 | FNMA, Pool# 662138 (1 Year CMT Rate + 2.30%) | 4.55 | % | 09/01/2032 | 45,203 | |||||||
53,990 | FNMA, Pool# 668309 (1 Year CMT Rate + 2.02%) | 4.27 | % | 11/01/2032 | 54,284 | |||||||
32,765 | FNMA, Pool# 696546 (6 Month LIBOR USD + 2.26%) | 4.76 | % | 03/01/2033 | 32,771 | |||||||
555,013 | FNMA, Pool# 687887 | 5.50 | % | 03/01/2033 | 600,411 | |||||||
215,802 | FNMA, Pool# 688002 | 5.50 | % | 03/01/2033 | 233,462 | |||||||
534,744 | FNMA, Pool# 702427 | 5.50 | % | 04/01/2033 | 573,058 | |||||||
120,967 | FNMA, Pool# 711206 | 5.50 | % | 05/01/2033 | 128,058 | |||||||
312,828 | FNMA, Pool# 711501 | 5.50 | % | 05/01/2033 | 332,115 | |||||||
867,727 | FNMA, Pool# 555458 | 5.50 | % | 05/01/2033 | 940,643 | |||||||
36,882 | FNMA, Pool# 555819 (6 Month LIBOR USD + 1.54%) | 4.26 | % | 07/01/2033 | 37,985 | |||||||
47,146 | FNMA, Pool# 744805 (6 Month LIBOR USD + 1.52%) | 4.02 | % | 11/01/2033 | 47,605 | |||||||
42,413 | FNMA, Pool# 751498 (1 Year CMT Rate + 2.22%) | 4.71 | % | 11/01/2033 | 44,601 | |||||||
30,450 | FNMA, Pool# 741373 (1 Year CMT Rate + 2.28%) | 4.78 | % | 12/01/2033 | 31,610 | |||||||
411,227 | FNMA, Pool# 725017 | 5.50 | % | 12/01/2033 | 445,793 | |||||||
31,185 | FNMA, Pool# 754767 | 6.50 | % | 12/01/2033 | 33,495 | |||||||
1,284,390 | FNMA, Pool# 763673 | 5.50 | % | 01/01/2034 | 1,389,229 | |||||||
394,585 | FNMA, Pool# 725599 | 5.50 | % | 01/01/2034 | 427,861 | |||||||
707,779 | FNMA, Pool# 759331 | 5.50 | % | 01/01/2034 | 766,688 | |||||||
33,914 | FNMA, Pool# 764342 (6 Month LIBOR USD + 1.52%) | 4.02 | % | 02/01/2034 | 34,878 | |||||||
115,420 | FNMA, Pool# 774969 (1 Year CMT Rate + 2.23%) | 4.11 | % | 04/01/2034 | 119,096 | |||||||
129,878 | FNMA, Pool# 783554 (1 Year CMT Rate + 2.21%) | 4.46 | % | 07/01/2034 | 132,412 | |||||||
31,921 | FNMA, Pool# 789060 (12 Month LIBOR USD + 1.75%) | 4.50 | % | 07/01/2034 | 33,457 | |||||||
500,369 | FNMA, Pool# 725690 | 6.00 | % | 08/01/2034 | 546,033 | |||||||
415,962 | FNMA, Pool# 801034 | 5.50 | % | 11/01/2034 | 448,375 | |||||||
412,579 | FNMA, Pool# AD0163 | 6.00 | % | 11/01/2034 | 450,254 | |||||||
521,202 | FNMA, Pool# AM7615 | 3.63 | % | 12/01/2034 | 533,570 |
The accompanying notes are an integral part of these financial statements.
68
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 89.4% (Continued) | ||||||||||||
16,976 | FNMA, Pool# 796283 | 5.50 | % | 12/01/2034 | 18,228 | |||||||
118,226 | FNMA, Pool# 735230 | 5.50 | % | 02/01/2035 | 127,379 | |||||||
39,390 | FNMA, Pool# 819649 (12 Month LIBOR USD + 1.52%) | 3.49 | % | 03/01/2035 | 41,045 | |||||||
93,114 | FNMA, Pool# 889829 | 5.00 | % | 07/01/2035 | 99,058 | |||||||
47,175 | FNMA, Pool# 830970 (12 Month LIBOR USD + 1.83%) | 4.56 | % | 08/01/2035 | 49,524 | |||||||
133,014 | FNMA, Pool# 837329 (1 Year CMT Rate + 2.04%) | 4.29 | % | 09/01/2035 | 139,973 | |||||||
146,371 | FNMA, Pool# 842006 | 4.25 | % | 10/01/2035 | 150,458 | |||||||
50,720 | FNMA, Pool# 836335 (1 Year CMT Rate + 2.23%) | 4.60 | % | 10/01/2035 | 50,999 | |||||||
59,454 | FNMA, Pool# 836715 (12 Month LIBOR USD + 1.77%) | 4.64 | % | 10/01/2035 | 59,732 | |||||||
48,696 | FNMA, Pool# 922680 (12 Month LIBOR USD + 1.91%) | 4.57 | % | 11/01/2035 | 51,269 | |||||||
286,295 | FNMA, Pool# 850232 | 4.25 | % | 12/01/2035 | 294,405 | |||||||
8,289 | FNMA, Pool# 848817 | 5.00 | % | 01/01/2036 | 8,737 | |||||||
14,630 | FNMA, Pool# 865849 (12 Month LIBOR USD + 1.54%) | 3.44 | % | 03/01/2036 | 15,105 | |||||||
66,571 | FNMA, Pool# 877009 (12 Month LIBOR USD + 2.38%) | 4.87 | % | 03/01/2036 | 71,471 | |||||||
63,590 | FNMA, Pool# 868568 (12 Month LIBOR USD + 1.76%) | 3.99 | % | 04/01/2036 | 66,921 | |||||||
70,226 | FNMA, Pool# 882017 (6 Month LIBOR USD + 1.56%) | 4.11 | % | 05/01/2036 | 72,630 | |||||||
49,169 | FNMA, Pool# 745626 (1 Year CMT Rate + 2.10%) | 4.27 | % | 05/01/2036 | 50,887 | |||||||
24,854 | FNMA, Pool# 872895 (12 Month LIBOR USD + 1.71%) | 4.41 | % | 06/01/2036 | 26,085 | |||||||
29,850 | FNMA, Pool# 886163 (12 Month LIBOR USD + 1.80%) | 4.55 | % | 07/01/2036 | 31,479 | |||||||
493,098 | FNMA, Pool# 896838 | 5.45 | % | 07/01/2036 | 521,025 | |||||||
573,276 | FNMA, Pool# 995026 | 6.00 | % | 09/01/2036 | 625,527 | |||||||
178,433 | FNMA, Pool# 745818 | 6.50 | % | 09/01/2036 | 199,022 | |||||||
172,208 | FNMA, Pool# 894270 (1 Year CMT Rate + 2.50%) | 5.00 | % | 10/01/2036 | 173,903 | |||||||
706,899 | FNMA, Pool# 960606 | 5.50 | % | 10/01/2036 | 757,316 | |||||||
545,946 | FNMA, Pool# 903242 | 6.00 | % | 10/01/2036 | 596,177 | |||||||
28,902 | FNMA, Pool# 905193 (12 Month LIBOR USD + 1.99%) | 4.86 | % | 11/01/2036 | 29,749 | |||||||
85,769 | FNMA, Pool# 902770 | 5.38 | % | 11/01/2036 | 90,562 | |||||||
105,271 | FNMA, Pool# 745959 | 5.50 | % | 11/01/2036 | 113,432 | |||||||
125,463 | FNMA, Pool# 940309 (12 Month LIBOR USD + 1.50%) | 4.37 | % | 01/01/2037 | 127,980 | |||||||
272,994 | FNMA, Pool# 900852 | 6.00 | % | 01/01/2037 | 297,258 | |||||||
35,703 | FNMA, Pool# 910181 (12 Month LIBOR USD + 1.71%) | 3.78 | % | 03/01/2037 | 37,397 | |||||||
47,162 | FNMA, Pool# 888445 (12 Month LIBOR USD + 1.56%) | 4.01 | % | 04/01/2037 | 50,080 | |||||||
290,034 | FNMA, Pool# 995148 | 5.50 | % | 04/01/2037 | 312,512 | |||||||
70,652 | FNMA, Pool# 995521 (12 Month LIBOR USD + 1.84%) | 4.26 | % | 05/01/2037 | 73,836 | |||||||
135,460 | FNMA, Pool# 888418 | 5.50 | % | 05/01/2037 | 146,763 | |||||||
95,159 | FNMA, Pool# 950382 (6 Month LIBOR USD + 1.09%) | 3.62 | % | 08/01/2037 | 96,990 | |||||||
163,789 | FNMA, Pool# 941050 (12 Month LIBOR USD + 1.70%) | 4.45 | % | 08/01/2037 | 163,155 | |||||||
64,178 | FNMA, Pool# 953988 | 5.38 | % | 08/01/2037 | 65,346 | |||||||
141,188 | FNMA, Pool# 995024 | 5.50 | % | 08/01/2037 | 152,106 | |||||||
64,056 | FNMA, Pool# 946403 (1 Year CMT Rate + 2.32%) | 4.44 | % | 09/01/2037 | 64,143 | |||||||
61,352 | FNMA, Pool# 952835 (1 Year CMT Rate + 2.32%) | 4.48 | % | 09/01/2037 | 64,957 | |||||||
165,268 | FNMA, Pool# 955233 | 6.50 | % | 12/01/2037 | 185,950 | |||||||
833,652 | FNMA, Pool# AD0555 | 5.50 | % | 02/01/2038 | 898,333 | |||||||
81,156 | FNMA, Pool# 962656 (12 Month LIBOR USD + 1.25%) | 3.42 | % | 04/01/2038 | 83,354 | |||||||
16,568 | FNMA, Pool# 982237 (12 Month LIBOR USD + 1.84%) | 4.47 | % | 05/01/2038 | 17,443 | |||||||
184,575 | FNMA, Pool# AL1543 | 5.50 | % | 12/01/2038 | 198,868 | |||||||
115,528 | FNMA, Pool# 930507 | 6.50 | % | 02/01/2039 | 127,658 | |||||||
3,465,900 | FNMA, Pool# AS2249 | 4.00 | % | 04/01/2039 | 3,565,357 | |||||||
421,096 | FNMA, Pool# AD0427 | 5.50 | % | 10/01/2039 | 455,313 | |||||||
2,479,810 | FNMA, Pool# AD3507 | 5.00 | % | 04/01/2040 | 2,639,730 | |||||||
548,282 | FNMA, Pool# AD0941 | 5.50 | % | 04/01/2040 | 589,414 | |||||||
633,690 | FNMA, Pool# 467095 | 5.90 | % | 01/01/2041 | 725,560 | |||||||
11,607 | FNMA, Pool# AI1170 | 5.00 | % | 04/01/2041 | 12,328 | |||||||
658,545 | FNMA, Pool# AH8447 | 5.50 | % | 04/01/2041 | 700,768 | |||||||
3,158,206 | FNMA, Pool# BM4143 | 6.00 | % | 07/01/2041 | 3,448,013 | |||||||
4,988,251 | FNMA, Pool# BM3797 | 6.00 | % | 07/01/2041 | 5,444,512 |
The accompanying notes are an integral part of these financial statements.
69
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 89.4% (Continued) | ||||||||||||
290,378 | FNMA, Pool# AL2903 | 5.50 | % | 09/01/2041 | 314,748 | |||||||
720,610 | FNMA, Pool# 469130 | 4.87 | % | 10/01/2041 | 772,239 | |||||||
10,948 | FNMA, Pool# AR1150 | 3.00 | % | 01/01/2043 | 10,770 | |||||||
851,011 | FNMA, Pool# BC1738 | 4.50 | % | 09/01/2043 | 886,315 | |||||||
1,538,491 | FNMA, Pool# AU6230 | 5.00 | % | 09/01/2043 | 1,629,325 | |||||||
770,555 | FNMA, Pool# AS1429 | 4.00 | % | 12/01/2043 | 788,552 | |||||||
608,343 | FNMA, Pool# AV7739 | 4.00 | % | 01/01/2044 | 626,648 | |||||||
1,769,330 | FNMA, Pool# BC1737 | 4.00 | % | 01/01/2044 | 1,820,094 | |||||||
817,719 | FNMA, Pool# AW6485 | 4.00 | % | 06/01/2044 | 840,989 | |||||||
956,857 | FNMA, Pool# AY0382 | 4.00 | % | 11/01/2044 | 971,911 | |||||||
734,177 | FNMA, Pool# AW9534 | 4.00 | % | 03/01/2045 | 755,562 | |||||||
907,883 | FNMA, Pool# AZ4154 | 4.00 | % | 06/01/2045 | 932,118 | |||||||
3,205,800 | FNMA, Pool# AZ7828 | 4.00 | % | 08/01/2045 | 3,273,738 | |||||||
1,380,587 | FNMA, Pool# BA3674 | 4.50 | % | 10/01/2045 | 1,443,873 | |||||||
1,372,084 | FNMA, Pool# BA5587 | 4.00 | % | 01/01/2046 | 1,408,064 | |||||||
1,051,803 | FNMA, Pool# BC1231 | 4.00 | % | 02/01/2046 | 1,079,083 | |||||||
792,663 | FNMA, Pool# BC6366 | 4.50 | % | 02/01/2046 | 830,416 | |||||||
753,577 | FNMA, Pool# BD1241 | 4.50 | % | 05/01/2046 | 784,651 | |||||||
1,183,794 | FNMA, Pool# BD1026 | 4.00 | % | 06/01/2046 | 1,208,030 | |||||||
1,634,054 | FNMA, Pool# BD5189 | 4.50 | % | 07/01/2046 | 1,704,007 | |||||||
999,220 | FNMA, Pool# BD8599 | 4.50 | % | 11/01/2046 | 1,049,719 | |||||||
1,057,511 | FNMA, Pool# BD3999 | 4.50 | % | 05/01/2047 | 1,096,407 | |||||||
1,108,122 | FNMA, Pool# BD4009 | 4.00 | % | 07/01/2047 | 1,148,175 | |||||||
1,063,791 | FNMA, Pool# BD4010 | 4.00 | % | 07/01/2047 | 1,100,833 | |||||||
800,855 | FNMA, Pool# BD4041 | 4.00 | % | 11/01/2047 | 822,600 | |||||||
1,176,556 | FNMA, Pool# BH7686 | 4.50 | % | 12/01/2047 | 1,219,786 | |||||||
1,482,789 | FNMA, Pool# BJ8287 | 4.50 | % | 01/01/2048 | 1,550,644 | |||||||
920,555 | FNMA, Pool# BJ4035 | 4.50 | % | 02/01/2048 | 960,028 | |||||||
990,845 | FNMA, Pool# AN8989 | 4.07 | % | 04/01/2048 | 996,127 | |||||||
1,052,885 | FNMA, Pool# BJ4051 | 4.50 | % | 05/01/2048 | 1,104,023 | |||||||
684,736 | FNMA, Pool# BJ4050 | 4.50 | % | 05/01/2048 | 717,591 | |||||||
685,435 | FNMA, Pool# BJ4052 | 4.50 | % | 05/01/2048 | 716,809 | |||||||
973,888 | FNMA, Pool# BK5105 | 5.50 | % | 05/01/2048 | 1,042,130 | |||||||
1,271,149 | FNMA, Pool# BJ4057 | 4.50 | % | 06/01/2048 | 1,323,098 | |||||||
704,469 | FNMA, Pool# BK8032 | 5.50 | % | 06/01/2048 | 753,834 | |||||||
964,157 | FNMA, Pool# BJ4061 | 4.50 | % | 07/01/2048 | 1,011,295 | |||||||
833,083 | FNMA, Pool# BJ4062 | 4.50 | % | 07/01/2048 | 868,031 | |||||||
746,467 | FNMA, Pool# BJ4060 | 4.50 | % | 07/01/2048 | 782,790 | |||||||
1,598,371 | FNMA, Pool# BJ4067 | 4.50 | % | 08/01/2048 | 1,668,136 | |||||||
634,922 | FNMA, Pool# BN0202 | 5.50 | % | 09/01/2048 | 679,415 | |||||||
18 | FNMA REMIC Trust, Series 1990-105 | 6.50 | % | 09/25/2020 | 18 | |||||||
34,884 | FNMA REMIC Trust, Series 1990-116 | 9.00 | % | 10/25/2020 | 36,151 | |||||||
51,054 | FNMA REMIC Trust, Series 1991-136 | 7.50 | % | 10/25/2021 | 52,996 | |||||||
2,259 | FNMA REMIC Trust, Series 2012-1 | 1.75 | % | 12/25/2021 | 2,239 | |||||||
114,627 | FNMA REMIC Trust, Series 2002-16 | 6.00 | % | 04/25/2022 | 117,584 | |||||||
719,627 | FNMA REMIC Trust, Series 2015-M3 | 2.30 | % | 10/25/2024 | 709,196 | |||||||
475,103 | FNMA REMIC Trust, Series 2015-M17 | 2.52 | % | 11/25/2025 | 471,889 | |||||||
484,375 | FNMA REMIC Trust, Series 2015-M6# | 2.95 | % | 01/25/2026 | 488,811 | |||||||
130,204 | FNMA REMIC Trust, Series 1996-23 | 6.50 | % | 07/25/2026 | 139,372 | |||||||
1,498,124 | FNMA REMIC Trust, Series 2017-T1 | 2.90 | % | 06/25/2027 | 1,433,553 | |||||||
1,705,000 | FNMA REMIC Trust, Series 2017-M13# | 2.94 | % | 09/25/2027 | 1,659,803 | |||||||
2,462,039 | FNMA REMIC Trust, Series 2012-139~ | 2.50 | % | 12/25/2027 | 175,693 | |||||||
1,832,525 | FNMA REMIC Trust, Series 2018-M2# | 2.80 | % | 01/25/2028 | 1,834,144 | |||||||
179,626 | FNMA REMIC Trust, Series 2013-15~ | 3.00 | % | 03/25/2028 | 15,989 | |||||||
1,625,000 | FNMA REMIC Trust, Series 2018-M8# | 3.33 | % | 06/25/2028 | 1,620,649 | |||||||
949,074 | FNMA REMIC Trust, Series 2016-M10 | 2.10 | % | 07/25/2028 | 907,557 |
The accompanying notes are an integral part of these financial statements.
70
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 89.4% (Continued) | ||||||||||||
118,640 | FNMA REMIC Trust, Series 2009-60 | 5.00 | % | 08/25/2029 | 125,051 | |||||||
2,729,749 | FNMA REMIC Trust, Series 2018-M3# | 2.99 | % | 02/25/2030 | 2,720,270 | |||||||
1,984,453 | FNMA REMIC Trust, Series 2018-M12 | 3.55 | % | 08/25/2030 | 2,048,829 | |||||||
1,748,121 | FNMA REMIC Trust, Series 2018-M13# | 3.82 | % | 09/25/2030 | 1,844,172 | |||||||
2,310,687 | FNMA REMIC Trust, Series 2013-115~ | 3.00 | % | 04/25/2031 | 255,796 | |||||||
6,837,069 | FNMA REMIC Trust, Series 2014-14~ | 3.00 | % | 04/25/2031 | 465,802 | |||||||
314,129 | FNMA REMIC Trust, Series 2001-80 | 6.00 | % | 01/25/2032 | 333,013 | |||||||
326,894 | FNMA REMIC Trust, Series 2006-M2# | 5.27 | % | 10/25/2032 | 355,121 | |||||||
689,784 | FNMA REMIC Trust, Series 2003-71 | 5.50 | % | 08/25/2033 | 759,203 | |||||||
2,966,529 | FNMA REMIC Trust, Series 2005-73 | 5.50 | % | 08/25/2035 | 3,281,324 | |||||||
82,863 | FNMA REMIC Trust, Series 2012-30 | 3.00 | % | 08/25/2036 | 82,409 | |||||||
926,177 | FNMA REMIC Trust, Series 2006-112 | 5.50 | % | 11/25/2036 | 1,016,605 | |||||||
46,337 | FNMA REMIC Trust, Series 2009-103# | 4.29 | % | 12/25/2039 | 49,496 | |||||||
627,622 | FNMA REMIC Trust, Series 2010-43 | 5.50 | % | 05/25/2040 | 690,119 | |||||||
2,593,797 | FNMA REMIC Trust, Series 2012-65 | 5.00 | % | 07/25/2040 | 2,811,127 | |||||||
341,315 | FNMA REMIC Trust, Series 2011-52 | 5.00 | % | 06/25/2041 | 368,189 | |||||||
241,854 | FNMA REMIC Trust, Series 2012-10 (1 Month LIBOR USD + 0.55%) | 3.06 | % | 02/25/2042 | 244,393 | |||||||
1,358,500 | FNMA REMIC Trust, Series 2013-34~ | 3.00 | % | 05/25/2042 | 188,490 | |||||||
11,710 | FNMA REMIC Trust, Series 2003-W10 | 4.30 | % | 06/25/2043 | 12,005 | |||||||
4,100 | FNMA REMIC Trust, Series 2003-W12 | 4.48 | % | 06/25/2043 | 4,303 | |||||||
24,599 | FNMA REMIC Trust, Series 2003-W12 | 4.55 | % | 06/25/2043 | 25,675 | |||||||
13,768 | FNMA REMIC Trust, Series 2003-W12 | 4.68 | % | 06/25/2043 | 14,251 | |||||||
16,063 | FNMA REMIC Trust, Series 2003-W12 | 5.00 | % | 06/25/2043 | 16,900 | |||||||
1,054,274 | FNMA REMIC Trust, Series 2015-40~ | 4.50 | % | 03/25/2045 | 250,345 | |||||||
11,000,000 | FNMA, 3.0%, Due TBA January | 3.00 | % | 01/15/2033 | 10,973,574 | |||||||
7,000,000 | FNMA, 3.5%, Due TBA January | 3.50 | % | 01/15/2033 | 7,084,629 | |||||||
6,000,000 | FNMA, 4.5%, Due TBA January | 4.50 | % | 01/15/2048 | 6,213,867 | |||||||
6,000,000 | FNMA, 5.0%, Due TBA January | 5.00 | % | 01/15/2048 | 6,285,469 | |||||||
70,600 | GNMA, Pool# 782602X | 5.00 | % | 09/15/2022 | 72,980 | |||||||
49,372 | GNMA, Pool# 672701X | 4.00 | % | 05/15/2023 | 50,585 | |||||||
45,768 | GNMA, Pool# 782396X | 6.00 | % | 09/15/2023 | 47,876 | |||||||
39,783 | GNMA, Pool# 004295M | 6.00 | % | 10/20/2023 | 40,284 | |||||||
325,780 | GNMA, Pool# 783374X | 5.50 | % | 04/15/2024 | 338,542 | |||||||
19,933 | GNMA, Pool# 710732X | 4.50 | % | 08/15/2024 | 20,864 | |||||||
384,777 | GNMA, Pool# 728160X | 5.25 | % | 11/15/2024 | 407,919 | |||||||
19,529 | GNMA, Pool# 723460X | 4.00 | % | 12/15/2024 | 20,042 | |||||||
333,541 | GNMA, Pool# 005247M | 3.50 | % | 11/20/2026 | 334,283 | |||||||
460,450 | GNMA, Pool# 623145X | 5.50 | % | 10/15/2028 | 493,817 | |||||||
8,378 | GNMA, Pool# 487110X | 6.50 | % | 04/15/2029 | 9,303 | |||||||
468,354 | GNMA, Pool# 589694X | 4.50 | % | 08/15/2029 | 489,165 | |||||||
135,909 | GNMA, Pool# 728157X | 3.75 | % | 11/15/2029 | 138,783 | |||||||
4,571 | GNMA, Pool# 571166X | 7.00 | % | 08/15/2031 | 4,644 | |||||||
460,440 | GNMA, Pool# 770225C | 4.25 | % | 08/20/2031 | 479,958 | |||||||
621,130 | GNMA, Pool# 003160M | 6.00 | % | 11/20/2031 | 672,593 | |||||||
1,682,557 | GNMA, Pool# 752099X | 3.50 | % | 12/15/2032 | 1,715,487 | |||||||
333,031 | GNMA, Pool# 758872X | 3.00 | % | 03/15/2033 | 329,640 | |||||||
1,223,099 | GNMA, Pool# 604389X | 5.00 | % | 06/15/2033 | 1,303,392 | |||||||
1,996,024 | GNMA, Pool# 711773C | 3.50 | % | 06/20/2033 | 2,008,823 | |||||||
1,024,341 | GNMA, Pool# 711788C | 3.50 | % | 07/20/2033 | 1,030,909 | |||||||
1,071,829 | GNMA, Pool# 615958X | 5.00 | % | 09/15/2033 | 1,136,175 | |||||||
871,282 | GNMA, Pool# 003489M | 6.00 | % | 12/20/2033 | 953,207 | |||||||
550,929 | GNMA, Pool# 781746X | 5.00 | % | 05/15/2034 | 584,044 | |||||||
652,204 | GNMA, Pool# 781815X | 5.00 | % | 10/15/2034 | 691,368 | |||||||
479,488 | GNMA, Pool# 782173M | 5.50 | % | 05/20/2035 | 512,440 | |||||||
273,307 | GNMA, Pool# 784315X | 6.00 | % | 06/15/2036 | 293,408 | |||||||
402,392 | GNMA, Pool# 770226C | 4.75 | % | 09/20/2036 | 421,578 |
The accompanying notes are an integral part of these financial statements.
71
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Mortgage Backed Securities — 89.4% (Continued) | |||||||||||||
8,753 | GNMA, Pool# 646058X | 6.00 | % | 11/15/2037 | 9,396 | ||||||||
437,739 | GNMA, Pool# 767055X | 3.00 | % | 05/15/2038 | 434,819 | ||||||||
531,195 | GNMA, Pool# 763853X | 3.00 | % | 07/15/2038 | 527,026 | ||||||||
99,413 | GNMA, Pool# 706295C | 5.10 | % | 12/20/2038 | 103,727 | ||||||||
6,305 | GNMA REMIC Trust, Series 2012-03 | 3.00 | % | 01/16/2027 | 6,331 | ||||||||
838,358 | GNMA REMIC Trust, Series 2013-168 IA~ | 2.50 | % | 11/16/2028 | 63,394 | ||||||||
96 | GNMA REMIC Trust, Series 2003-97 | 4.50 | % | 03/20/2033 | 96 | ||||||||
122,456 | GNMA REMIC Trust, Series 2003-94 | 4.00 | % | 04/16/2033 | 123,708 | ||||||||
1,878,715 | GNMA REMIC Trust, Series 2006-47 | 5.00 | % | 08/16/2036 | 2,005,206 | ||||||||
165,514 | GNMA REMIC Trust, Series 2006-40 | 6.00 | % | 08/20/2036 | 179,617 | ||||||||
875,143 | GNMA REMIC Trust, Series 2012-52# | 6.15 | % | 04/20/2038 | 981,988 | ||||||||
1,248,092 | GNMA REMIC Trust, Series 2011-2# | 5.46 | % | 03/20/2039 | 1,361,627 | ||||||||
682,000 | GNMA REMIC Trust, Series 2011-156 | 2.00 | % | 04/20/2040 | 557,882 | ||||||||
568,039 | GNMA REMIC Trust, Series 2016-112# | 7.13 | % | 12/20/2040 | 649,259 | ||||||||
831,612 | GNMA REMIC Trust, Series 2012-97 | 2.00 | % | 08/16/2042 | 697,630 | ||||||||
485,742 | GNMA REMIC Trust, Series 2011-121 (1 Month LIBOR USD + 0.40%) | 2.86 | % | 03/16/2043 | 484,950 | ||||||||
725,000 | GNMA REMIC Trust, Series 2012-44 | 2.95 | % | 08/16/2043 | 716,136 | ||||||||
4,532,739 | GNMA REMIC Trust, Series 2014-135 I0#~ | 0.82 | % | 01/16/2056 | 236,379 | ||||||||
4,482,555 | GNMA REMIC Trust, Series 2015-172 I0#~ | 0.90 | % | 03/16/2057 | 277,017 | ||||||||
6,234,102 | GNMA REMIC Trust, Series 2016-40 I0#~ | 0.77 | % | 07/16/2057 | 347,862 | ||||||||
5,086,129 | GNMA REMIC Trust, Series 2016-56 I0#~ | 0.97 | % | 11/16/2057 | 355,387 | ||||||||
6,032,898 | GNMA REMIC Trust, Series 2016-98 I0#~ | 0.95 | % | 05/16/2058 | 444,544 | ||||||||
2,500,000 | GSMS, Series 2018-FBLU D (1 Month LIBOR USD + 2.00%)^ | 4.46 | % | 11/15/2035 | 2,473,455 | ||||||||
550,000 | MSC, Series 2017-CLS D (1 Month LIBOR USD + 1.40%)^ | 3.86 | % | 11/15/2034 | 542,822 | ||||||||
1,122,000 | Velocity Commercial Capital Loan Trust, Series 2017-1 M1#^ | 3.55 | % | 05/25/2047 | 1,098,036 | ||||||||
Total Mortgage Backed Securities (Cost $264,944,987) | 264,189,819 | ||||||||||||
Asset Backed Securities — 12.1% | |||||||||||||
404,719 | BRE Grand Islander Timeshare Issuer LLC, Series 2017-1A A^ | 2.94 | % | 05/25/2029 | 399,808 | ||||||||
1,500,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2015-1A CR (3 Month LIBOR USD + 2.00%)^ | 4.47 | % | 04/20/2027 | 1,477,732 | ||||||||
2,000,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2015-2A CR (3 Month LIBOR USD + 2.25%)^ | 4.76 | % | 04/27/2027 | 1,877,398 | ||||||||
478,868 | Continental Airlines Trust, Series 1999-1 A | 6.55 | % | 08/02/2020 | 480,093 | ||||||||
900,000 | CPS Auto Receivables Trust, Series 2016-C E^ | 8.39 | % | 09/15/2023 | 950,159 | ||||||||
3,000,000 | Drive Auto Receivables Trust, Series 2018-1 D | 3.81 | % | 05/15/2024 | 3,006,542 | ||||||||
945,000 | Drive Auto Receivables Trust, Series 2018-2 D | 4.14 | % | 08/15/2024 | 953,244 | ||||||||
1,600,000 | Drive Auto Receivables Trust, Series 2018-3 D | 4.30 | % | 09/16/2024 | 1,623,592 | ||||||||
2,200,000 | DT Auto Owner Trust, Series 2017-4A D^ | 3.47 | % | 07/17/2023 | 2,194,260 | ||||||||
1,500,000 | DT Auto Owner Trust, Series 2017-3A E^ | 5.60 | % | 08/15/2024 | 1,536,005 | ||||||||
600,000 | Invitation Homes Trust, Series 2017-SFR2 C (1 Month LIBOR USD + 1.45%)^ | 3.88 | % | 12/19/2036 | 598,426 | ||||||||
600,000 | Invitation Homes Trust, Series 2018-SFR2 C (1 Month LIBOR USD + 1.28%)^ | 3.74 | % | 06/18/2037 | 595,919 | ||||||||
1,000,000 | Madison Park Funding XXI, Ltd., Series 2016-21A B (3 Month LIBOR USD + 2.75%)^ | 5.24 | % | 07/25/2029 | 1,002,301 | ||||||||
750,000 | Magnetite IX, Ltd., Series 2014-9A CR (3 Month LIBOR USD + 3.10%)^ | 5.59 | % | 07/25/2026 | 754,914 | ||||||||
214,063 | MVW Owner Trust, Series 2017-1A B^ | 2.75 | % | 12/20/2034 | 209,858 | ||||||||
700,000 | Oportun Funding IX LLC, Series 2018-B A^ | 3.91 | % | 07/08/2024 | 700,869 | ||||||||
500,000 | Oportun Funding IX LLC, Series 2018-B B^ | 4.50 | % | 07/08/2024 | 503,792 | ||||||||
650,000 | Oportun Funding VII LLC, Series 2017-B B^ | 4.26 | % | 10/10/2023 | 650,967 | ||||||||
500,000 | Oportun Funding VII LLC, Series 2017-B C^ | 5.29 | % | 10/10/2023 | 500,755 | ||||||||
950,000 | Oportun Funding X LLC, Series 2018-C B^ | 4.59 | % | 10/08/2024 | 962,098 | ||||||||
446,888 | Orange Lake Timeshare Trust, Series 2018-A B^ | 3.35 | % | 11/08/2030 | 446,913 | ||||||||
126,951 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2B (1 Month LIBOR USD + 0.80%)^ | 3.19 | % | 05/11/2020 | 127,012 | ||||||||
292,548 | OSCAR U.S. Funding Trust VII LLC, Series 2017-2A A2B (1 Month LIBOR USD + 0.65%)^ | 3.04 | % | 11/10/2020 | 292,866 | ||||||||
1,030,000 | Progress Residential Trust, Series 2016-SFR2 C (1 Month LIBOR USD + 2.20%)^ | 4.66 | % | 01/20/2034 | 1,031,050 | ||||||||
600,000 | Progress Residential Trust, Series 2018-SFR1 C^ | 3.68 | % | 03/17/2035 | 591,626 | ||||||||
3,110,000 | Santander Drive Auto Receivables Trust, Series 2017-1 E^ | 5.05 | % | 07/15/2024 | 3,188,329 | ||||||||
354,141 | Sierra Timeshare Receivables Funding LLC, Series 2015-3A A^ | 2.58 | % | 09/20/2032 | 351,002 | ||||||||
291,456 | Sierra Timeshare Receivables Funding LLC, Series 2016-2A A^ | 2.33 | % | 07/20/2033 | 283,570 | ||||||||
500,000 | Symphony CLO XIV, Ltd., Series 2014-14A D2 (3 Month LIBOR USD + 3.60%)^ | 6.04 | % | 07/14/2026 | 502,582 |
The accompanying notes are an integral part of these financial statements.
72
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Asset Backed Securities — 12.1% (Continued) | |||||||||||||
44,998 | U.S. Airways Pass Through Trust, Series 1999-1 A< | 8.36 | % | 07/20/2020 | 44,998 | ||||||||
76,156 | Welk Resorts LLC, Series 2015-AA A^ | 2.79 | % | 06/15/2031 | 75,163 | ||||||||
760,801 | Westgate Resorts LLC, Series 2018-1A B^ | 3.58 | % | 12/20/2031 | 757,988 | ||||||||
1,014,401 | Westgate Resorts LLC, Series 2018-1A C^ | 4.10 | % | 12/20/2031 | 1,016,316 | ||||||||
2,980,000 | Westlake Automobile Receivables Trust, Series 2018-1A D^ | 3.41 | % | 05/15/2023 | 2,960,050 | ||||||||
1,000,000 | Westlake Automobile Receivables Trust, Series 2018-2A D^ | 4.00 | % | 01/16/2024 | 1,009,571 | ||||||||
2,000,000 | Westlake Automobile Receivables Trust, Series 2017-2A E^ | 4.63 | % | 07/15/2024 | 2,002,358 | ||||||||
Total Asset Backed Securities (Cost $35,746,820) | 35,660,126 | ||||||||||||
Municipal Bonds — 3.4% | |||||||||||||
1,200,000 | District of Columbia# | 6.55 | % | 08/01/2038 | 1,200,000 | ||||||||
2,700,000 | District of Columbia# | 6.71 | % | 08/01/2038 | 2,700,000 | ||||||||
450,000 | Landis Sewage Authority# | 5.43 | % | 09/19/2019 | 450,000 | ||||||||
1,590,000 | Maryland Community Development Administration | 3.24 | % | 09/01/2048 | 1,569,203 | ||||||||
1,000,000 | Massachusetts Port Authority# | 4.99 | % | 01/01/2031 | 1,000,000 | ||||||||
3,000,000 | Mosaic District Community Development Authority | 7.25 | % | 03/01/2036 | 3,161,490 | ||||||||
Total Municipal Bonds (Cost $9,755,270) | 10,080,693 | ||||||||||||
Corporate Bonds & Notes — 0.8% | |||||||||||||
500,000 | Capital One Financial Corp. (Fixed until 06/01/2020, then 3 Month LIBOR USD + 3.80%) | 5.55 | % | 12/29/2049 | 482,805 | ||||||||
1,500,000 | Outfront Media Capital LLC | 5.88 | % | 03/15/2025 | 1,477,500 | ||||||||
500,000 | Southern California Edison Co. (Fixed until 02/01/2022, then 3 Month LIBOR USD + 4.20%) | 6.25 | % | 08/01/2049 | 477,500 | ||||||||
Total Corporate Bonds & Notes (Cost $2,488,245) | 2,437,805 | ||||||||||||
U.S. Treasury Notes — 1.7% | |||||||||||||
5,000,000 | United States Treasury Note | 1.88 | % | 12/15/2020 | 4,941,504 | ||||||||
Total U.S. Treasury Notes (Cost $4,938,865) | 4,941,504 | ||||||||||||
Preferred Stocks — 0.5% | |||||||||||||
28,655 | AGNC Investment Corp., Series B, 7.75% | 726,691 | |||||||||||
2,768 | AGNC Investment Corp., Series C, 7.00% | ||||||||||||
(Fixed until 10/15/2022, then 3 Month LIBOR USD + 5.11%) | 69,975 | ||||||||||||
25,000 | Annaly Capital Management, Inc., Series G, 6.50% | ||||||||||||
(Fixed until 3/31/2023, then 3 Month LIBOR USD + 4.17%) | 580,750 | ||||||||||||
Total Preferred Stocks (Cost $1,404,686) | 1,377,416 | ||||||||||||
Short-Term Investments — 2.1% | |||||||||||||
Money Market Funds — 2.0% | |||||||||||||
5,873,485 | First American Government Obligations Fund — Class Z, 2.32%* | 5,873,485 | |||||||||||
U.S. Treasury Bills — 0.1% | |||||||||||||
460,000 | United States Treasury Bill† | 459,127 | |||||||||||
Total Short-Term Investments (Cost $6,332,612) | 6,332,612 | ||||||||||||
Total Investments — 110.0% (Cost $325,611,485) | 325,019,975 | ||||||||||||
Liabilities in Excess of Other Assets — (10.0)% | (29,475,654 | ) | |||||||||||
NET ASSETS — 100.0% | $ | 295,544,321 |
# | Variable rate security. Rate disclosed is as of December 31, 2018. |
ʭ | Step bond; the interest rate shown is the rate in effect as of December 31, 2018. |
^ | 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, 2018, the value of these securities amounted to $37,220,679 or 12.6% of net assets. |
< | This security is being fair valued, using significant unobservable inputs (Level 3), under the supervision of the Board of Trustees. |
~ | Interest Only Security |
† | A portion of this security is pledged as collateral in connection with open futures contracts. |
* | Annualized seven-day yield as of December 31, 2018. |
The accompanying notes are an integral part of these financial statements.
73
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
Mortgage Backed Securities | 89.4% |
Asset Backed Securities | 12.1% |
Municipal Bonds | 3.4% |
Money Market Funds | 2.0% |
U.S. Treasury Notes | 1.7% |
Corporate Bonds & Notes | 0.8% |
Preferred Stocks | 0.5% |
U.S. Treasury Bills | 0.1% |
Other Assets and Liabilities | (10.0)% |
100.0% |
Futures Contracts — Long (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury Long Bond Futures | 150 | 03/20/2019 | $ | 20,914,004 | $ | 21,900,000 | $ | 985,996 | |||||||||
U.S. Treasury 10-Year Ultra Futures | 115 | 03/20/2019 | 14,573,440 | 14,958,984 | 385,544 | ||||||||||||
U.S. Treasury Ultra Bond Futures | 35 | 03/20/2019 | 5,340,132 | 5,622,969 | 282,837 | ||||||||||||
$ | 40,827,576 | $ | 42,481,953 | $ | 1,654,377 | ||||||||||||
Futures Contracts — Short (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury 5-Year Note Futures | (190) | 03/29/2019 | $ | (21,440,910 | ) | $ | (21,790,625 | ) | $ | (349,715 | ) | ||||||
U.S. Treasury 2-Year Note Futures | (230) | 03/29/2019 | (48,518,156 | ) | (48,831,875 | ) | (313,719 | ) | |||||||||
U.S. Treasury 10-Year Note Futures | (100) | 03/20/2019 | (11,917,492 | ) | (12,201,563 | ) | (284,071 | ) | |||||||||
$ | (81,876,558 | ) | $ | (82,824,063 | ) | $ | (947,505 | ) |
There is no variation margin due to or from the Fund as of December 31, 2018.
The accompanying notes are an integral part of these financial statements.
74
Brown Advisory – WMC Strategic European Equity Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory – WMC Strategic European Equity Fund – Institutional Shares (the “Fund”) fell 13.18%, while the MSCI Europe Index (the “Index”), the Fund’s benchmark, fell 12.02% over the same period.
We take a bottom-up approach to building the portfolio and aim to identify companies that we believe benefit from a structural growth advantage, are competitively well-positioned, and are attractively valued.
Stock selection was negative during the period. Selection within the information technology, financials, and industrials sectors detracted most from relative performance. Strong selection within consumer discretionary and health care was not enough to offset this negative performance. Sector allocation–a result of our bottom-up stock selection process–was neutral. The Fund’s underweight to materials contributed to benchmark relative performance but was offset by an overweight to industrials, which detracted.
Top detractors from relative returns included our positions in Julius Baer (financials), Electrocomponents (information technology), and Elis (industrials). Not holding benchmark constituents Novartis (health care) and Nestle (consumer staples) also weighed on relative results.
Julius Baer is a Swiss private banking and wealth management company. The stock underperformed after a strong 2017 as earnings revisions turned negative. This was primarily due to adverse market sentiment in Europe and European financials, poor performance in Asia where transaction volumes were lower than expected, and a minor money laundering scandal in Panama. We continue to have conviction in the company, its private banking franchise, and the wealth management industry, more broadly. We continue to hold the position as of the end of the period.
Electrocomponents is a UK-based high-service distributor serving small-order requirements in the industrial and electronics market. After a strong year, the stock underperformed at the end of 2018 after reporting lower underlying growth for the first part of the fourth quarter, cautionary comments from the company regarding their end-markets, and a sizable inventory investment to potentially protect against Brexit. Over the longer term, we continue to see potential for profit, highly rate the CEO, and believe that valuation looks attractive.
Elis is a French laundry services and textiles group, which acquired its UK-rival Berendsen last year. After a strong 2017, Elis faced a challenging 2018 primarily due to concerns over the Berendsen integration and revenue decline in the UK due to a number of lost clients. Over the longer term, we still believe that there are potential synergy opportunities from the merger and believe there is further room for growth. We continue to hold the name as of the end of the period.
The top contributors to relative returns during the period were Jardine Lloyd Thompson (financials), Merck (health care), and Smith & Nephew (health care).
Shares of British multinational insurance, reinsurance and employee benefits service provider Jardine Lloyd Thompson rose sharply during the period after U.S. insurance broker Marsh & McLennan confirmed that they would take over the company at a meaningful premium on the recent share price. We eliminated our position following the announcement.
Merck is a global pharmaceutical, life sciences and chemicals conglomerate based in Germany. Despite a setback in a drug trial for ovarian cancer earlier in the period and profits falling due to negative currency impacts, the company reported revenues ahead of consensus and raised its full-year organic sales growth expectations based on the performance of its healthcare and life sciences businesses. We continue to believe that the company is well positioned to perform well over the longer term, particularly in life sciences, but reduced our position on strength.
Smith & Nephew is a UK-based multinational medical equipment manufacturing company specializing in wound management and orthopedic products. The stock outperformed after the new CEO announced positive earnings results, planned changes to the commercial structure, and a cost-cutting exercise. We continue to believe that the business has a strong competitive position, a good balance sheet, and is exposed to growing end markets with further potential for margin expansion. Toward the end of the period, we began to reduce our position on strength and remain watchful on valuation.
Despite the normalization of some macroeconomic indicators and signs of a global economic slowdown, we believe that the long-term growth story in Europe is still supported by positive longer-term data and modestly increasing inflation. But political unease is expected to linger, and with the rising threat of protectionism, Brexit, as well as the uncertain implications of the Italian election result and European Parliamentary elections in 2019, the shorter-term outlook remains unclear and a degree of volatility
75
Brown Advisory – WMC Strategic European Equity Fund
A Message to Our Shareholders
December 31, 2018
is likely to persist. Against this backdrop, we continue to think that the environment is one of rising, albeit low, interest rates and steady longer-term growth. We believe that central banks will likely remain relatively accommodative, although with the European Central Bank scheduled to start tapering its asset purchases and the UK and the U.S. gradually raising rates, the direction of interest rates is likely up. Some of 2017’s euro strength has now reversed, though this does not fundamentally change our view on any existing holdings or any new positions. We think a relatively strong and likely more stable euro should not impact share prices over the longer term.
Looking forward, we continue to seek to identify companies that are exposed to structural growth drivers and have built strong competitive advantages. These intrinsic qualities have the potential to drive margins and returns, as well as high free cash flow generation, which we believe can create long-term value. In line with our philosophy, we continue to seek to remain disciplined around valuations across our holdings, trimming positions where higher valuations and expectations outpace fundamentals.
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.
76
Brown Advisory – WMC Strategic European Equity Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 98.5% | ||||||||
Austria — 0.4% | ||||||||
124,661 | Porr AG | 2,484,373 | ||||||
Belgium — 2.5% | ||||||||
185,672 | UCB S.A. | 15,165,074 | ||||||
Denmark — 3.4% | ||||||||
32,424 | ALK-Abello A/S* | 4,794,545 | ||||||
212,449 | DSV A/S | 14,030,649 | ||||||
281,084 | Spar Nord Bank A/S | 2,256,621 | ||||||
21,081,815 | ||||||||
Finland — 2.0% | ||||||||
262,228 | Kone OYJ | 12,519,140 | ||||||
France — 13.8% | ||||||||
138,842 | Capgemini SE | 13,809,939 | ||||||
759,045 | Elior Group S.A. | 11,357,721 | ||||||
933,934 | Elis S.A. | 15,570,315 | ||||||
330,739 | Legrand S.A. | 18,697,511 | ||||||
28,694 | L’Oreal S.A. | 6,565,893 | ||||||
97,628 | Pernod Ricard S.A. | 16,022,779 | ||||||
20,850 | Virbac S.A.* | 2,712,912 | ||||||
84,737,070 | ||||||||
Germany — 12.7% | ||||||||
42,893 | Adidas AG | 8,964,177 | ||||||
111,227 | Beiersdorf AG | 11,601,259 | ||||||
226,826 | Brenntag AG | 9,900,779 | ||||||
53,404 | Knorr-Bremse AG* | 4,810,576 | ||||||
168,047 | Merck KGaA | 17,297,528 | ||||||
206,507 | Siemens Healthineers AG* | 8,629,248 | ||||||
304,207 | United Internet AG | 13,314,718 | ||||||
51,861 | WashTec AG | 3,589,049 | ||||||
78,107,334 | ||||||||
Italy — 0.4% | ||||||||
30,871 | DiaSorin S.p.A. | 2,506,163 | ||||||
Netherlands — 9.4% | ||||||||
216,380 | Heineken NV | 19,125,158 | ||||||
1,244,352 | ING Groep NV | 13,385,008 | ||||||
236,700 | QIAGEN NV* | 8,088,225 | ||||||
320,203 | Unilever NV | 17,346,141 | ||||||
57,944,532 | ||||||||
Portugal — 1.3% | ||||||||
662,270 | Jeronimo Martins SGPS S.A. | 7,848,243 | ||||||
Spain — 1.7% | ||||||||
244,381 | Almirall S.A. | 3,741,301 | ||||||
149,288 | Laboratorios Farmaceuticos Rovi S.A. | 2,984,768 | ||||||
64,180 | Viscofan S.A. | 3,538,698 | ||||||
10,264,767 | ||||||||
Sweden — 12.2% | ||||||||
744,804 | Alfa Laval AB | 16,011,256 | ||||||
945,707 | Assa Abloy AB | 16,934,586 | ||||||
481,858 | Atlas Copco AB | 11,496,186 | ||||||
916,057 | Cloetta AB | 2,502,729 | ||||||
2,056,116 | Epiroc AB* | 19,542,591 | ||||||
556,038 | Trelleborg AB | 8,760,730 | ||||||
75,248,078 | ||||||||
Switzerland — 13.5% | ||||||||
512 | BELIMO Holding AG | 2,053,668 | ||||||
208,866 | Cie Financiere Richemont S.A. | 13,469,273 | ||||||
35,491 | Geberit AG | 13,820,928 | ||||||
6,288 | INFICON Holding AG* | 3,188,029 | ||||||
467,630 | Julius Baer Group, Ltd.* | 16,664,707 | ||||||
80,230 | Kuehne & Nagel International AG | 10,327,741 | ||||||
1,878,510 | UBS Group AG* | 23,431,113 | ||||||
82,955,459 | ||||||||
United Kingdom — 25.2% | ||||||||
357,735 | Bunzl PLC | 10,803,176 | ||||||
870,343 | Compass Group PLC | 18,316,224 | ||||||
200,650 | Diploma PLC | 3,097,123 | ||||||
2,033,884 | Electrocomponents PLC | 13,137,614 | ||||||
276,654 | Halma PLC | 4,819,432 | ||||||
643,078 | IMI PLC | 7,744,350 | ||||||
956,796 | Prudential PLC | 17,084,989 | ||||||
367,865 | Reckitt Benckiser Group PLC | 28,169,750 | ||||||
3,047,518 | Rentokil Initial PLC | 13,110,414 | ||||||
1,219,512 | Smith & Nephew PLC | 22,827,635 | ||||||
461,764 | Smiths Group PLC | 8,038,835 | ||||||
66,574 | Spirax-Sarco Engineering PLC | 5,299,016 | ||||||
329,194 | SSP Group PLC | 2,717,453 | ||||||
155,166,011 | ||||||||
Total Common Stocks (Cost $584,383,444) | 606,028,059 | |||||||
Preferred Stocks — 0.7% | ||||||||
Germany — 0.7% | ||||||||
95,868 | Fuchs Petrolub SE | 3,963,386 | ||||||
Total Preferred Stocks (Cost $4,044,135) | 3,963,386 | |||||||
Short-Term Investments — 1.3% | ||||||||
Money Market Funds — 1.3% | ||||||||
7,956,454 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 7,956,454 | |||||||
Total Short-Term Investments (Cost $7,956,454) | 7,956,454 | |||||||
Total Investments — 100.5% (Cost $596,384,033) | 617,947,899 | |||||||
Liabilities in Excess of Other Assets — (0.5)% | (2,857,557 | ) | ||||||
NET ASSETS — 100.0% | $ | 615,090,342 |
* | Non-Income Producing |
# | Annualized seven-day yield as of December 31, 2018. |
The accompanying notes are an integral part of these financial statements.
77
Brown Advisory – WMC Strategic European Equity Fund
Schedule of Investments
December 31, 2018 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
United Kingdom | 25.2% |
France | 13.8% |
Switzerland | 13.5% |
Germany | 13.4% |
Sweden | 12.2% |
Netherlands | 9.4% |
Denmark | 3.4% |
Belgium | 2.5% |
Finland | 2.0% |
Spain | 1.7% |
Money Market Funds | 1.3% |
Portugal | 1.3% |
Italy | 0.4% |
Austria | 0.4% |
Other Assets and Liabilities | (0.5)% |
100.0% |
The accompanying notes are an integral part of these financial statements.
78
Brown Advisory – WMC Japan Alpha Opportunities Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory – WMC Japan Alpha Opportunities Fund – Institutional Shares (the “Fund”) fell 15.95%. During the same period, the TOPIX Total Return Index (the “Index”), the Fund’s benchmark, decreased 12.60%.
Japanese stock prices rose during the third quarter of 2018 following expanded industrial and manufacturing production numbers. These gains were erased in the fourth quarter, however, as export growth slowed and retail sales decelerated. During the third quarter, we also saw an increase in inflation toward the Bank of Japan’s target rate of 2.0% but this reversed back to its prior level of 0.9% in the fourth quarter as softening economic activity failed to spur inflationary growth.
Security selection was the primary detractor from relative performance during the period as weak selection in the industrials, consumer discretionary and financials sectors was only partially offset by stronger selection in the communication services and health care sectors. Sector allocation, a result of the underlying managers’ bottom-up stock selection process, also detracted from performance. The Fund’s underweight to communication services and utilities detracted most.
Chiyoda, an engineering services provider, was the top relative detractor during the period. The company reported an operating loss for the first half of 2018 due in large part to increased construction costs of the company’s Cameron LNG plant in the United States. This adversely affected full-year guidance and the stock price plummeted as a result. We continue to own the stock as of the end of the period. Pioneer, a manufacturer of electronic products, was another detractor. The company announced that it reached an agreement to be acquired by a private equity firm at a discount to its trading price. We eliminated our position in the stock.
Fujitsu was the top relative contributor during the period. Fujitsu is an information and communication technology company. The company reported operating profit for the first half of 2018 in-line with management expectations but short of optimistic consensus estimates. Management remains focused on reforming its business, and raised targets for the three-year period, helping the stock outperform. We continue to hold the position as of the end of the period. Suzuki Motor, a vehicle automobile and motorcycle manufacturer, was also a top contributor. The stock rallied during the first half of the period as the company announced strong earnings results, particularly in Japan and India. Those gains were erased in the second half of the period as performance was weakened by foreign exchange losses and a reduction of output in Europe. Our position contributed to relative performance as we were overweight the stock during the rally and underweight during the downturn. We continue to hold the stock as of the end of the period because we believe the company is well positioned in underpenetrated markets, including India.
The Fund used index futures during the period as a means of managing cash flows within the Fund. Futures are not thought to be material performance drivers over time.
The latest cycle of economic expansion in Japan appears to have peaked and exports have begun to slow. Further deterioration of global economic conditions and escalating trade tensions, particularly with China and the United States, could further weaken exporters. But domestic fundamentals remain strong with low unemployment, continued wage growth, and strong business sentiment survey results. While core inflation remains below Bank of Japan targets, it is growing despite the headwind of depressed oil prices. We expect the tension between strong domestic fundamentals and exposure to a weakening global cycle to lead to increased market volatility in 2019. With a strong fundamental backdrop, we continue to see significant opportunities for stock picking in Japan.
On January 15, 2019, the Board of Trustees of Brown Advisory Funds, based upon the recommendation of the Adviser, has determined to close and liquidate the Fund. As a result of this recent action taken to terminate the Fund, this will be the last time we will be reporting to you with respect to the results of the Fund.
Sincerely,
Edward B. Baldini, CFA
Portfolio Manager
Gregg Thomas, CFA
Portfolio Manager
79
Brown Advisory – WMC Japan Alpha Opportunities Fund
A Message to Our Shareholders
December 31, 2018
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.
80
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 93.3% | ||||||||
Japan — 93.3% | ||||||||
Communication Services — 8.2% | ||||||||
60,470 | Avex, Inc. | 765,894 | ||||||
197,467 | DeNA Co., Ltd. | 3,293,713 | ||||||
51,475 | Fuji Media Holdings, Inc. | 709,710 | ||||||
267,210 | GREE, Inc. | 1,055,991 | ||||||
256,744 | Nexon Co., Ltd.* | 3,314,445 | ||||||
108,758 | Nippon Telegraph & Telephone Corp. | 4,437,253 | ||||||
199,643 | Nippon Television Holdings, Inc. | 2,939,095 | ||||||
13,510 | SoftBank Group Corp. | 884,894 | ||||||
30,710 | TV Asahi Holdings Corp. | 552,916 | ||||||
1,815,654 | Yahoo! Japan Corp. | 4,516,841 | ||||||
22,470,752 | ||||||||
Consumer Discretionary — 20.0% | ||||||||
29,600 | Adastria Co., Ltd. | 498,664 | ||||||
51,760 | Aisan Industry Co., Ltd. | 347,728 | ||||||
69,898 | ASKUL Corp. | 1,490,455 | ||||||
22,200 | BayCurrent Consulting, Inc. | 463,043 | ||||||
22,560 | Benesse Holdings, Inc. | 573,893 | ||||||
25,229 | Bridgestone Corp. | 967,932 | ||||||
35,500 | Canon Marketing Japan, Inc. | 632,714 | ||||||
73,000 | DaikyoNishikawa Corp. | 713,928 | ||||||
30,700 | Exedy Corp. | 749,899 | ||||||
155,845 | Fujitsu General, Ltd. | 2,003,248 | ||||||
89,490 | Funai Electric Co., Ltd.* | 428,746 | ||||||
17,070 | Gendai Agency, Inc. | 68,437 | ||||||
26,700 | H2O Retailing Corp. | 378,828 | ||||||
152,030 | Honda Motor Co., Ltd. | 4,005,241 | ||||||
32,710 | Honeys Holdings Co., Ltd. | 231,224 | ||||||
103,100 | IDOM, Inc. | 341,537 | ||||||
39,300 | IJT Technology Holdings Co., Ltd. | 216,878 | ||||||
76,987 | Isuzu Motors, Ltd. | 1,079,905 | ||||||
62,640 | Keihin Corp. | 1,048,203 | ||||||
63,600 | K’s Holdings Corp. | 626,017 | ||||||
56,716 | Kyoritsu Maintenance Co., Ltd. | 2,480,305 | ||||||
43,501 | Marui Group Co., Ltd. | 843,045 | ||||||
30,816 | NGK Spark Plug Co., Ltd. | 610,001 | ||||||
64,080 | Nikon Corp. | 954,479 | ||||||
106,076 | Nishimatsuya Chain Co., Ltd. | 859,114 | ||||||
123,682 | Nissan Motor Co., Ltd. | 989,372 | ||||||
60,339 | Nissin Kogyo Co., Ltd. | 764,498 | ||||||
97,450 | NOK Corp. | 1,357,696 | ||||||
47,289 | Pacific Industrial Co., Ltd. | 627,603 | ||||||
23,890 | PAL Group Holdings Co., Ltd. | 586,499 | ||||||
8,700 | Premium Group Co., Ltd. | 236,197 | ||||||
100,552 | Prestige International, Inc. | 1,088,577 | ||||||
11,750 | Proto Corp. | 149,658 | ||||||
18,300 | Raksul, Inc.* | 396,764 | ||||||
34,690 | Sanyo Shokai, Ltd. | 568,502 | ||||||
35,366 | Seiren Co., Ltd. | 573,518 | ||||||
60,949 | Sekisui Chemical Co., Ltd. | 906,046 | ||||||
22,296 | Shimamura Co., Ltd. | 1,707,328 | ||||||
32,533 | Subaru Corp. | 695,015 | ||||||
144,858 | Sumitomo Electric Industries, Ltd. | 1,918,404 | ||||||
57,070 | Sumitomo Riko Co., Ltd. | 472,954 | ||||||
54,418 | Suzuki Motor Corp. | 2,743,289 | ||||||
17,500 | Tachi-S Co., Ltd. | 227,993 | ||||||
116,734 | Tokai Rika Co., Ltd. | 1,927,559 | ||||||
17,828 | Token Corp. | 1,058,517 | ||||||
378,368 | Toyo Tire & Rubber Co., Ltd. | 4,703,967 | ||||||
67,400 | Toyoda Gosei Co., Ltd. | 1,326,887 | ||||||
17,107 | Toyota Industries Corp. | 787,775 | ||||||
12,300 | TS Tech Co., Ltd. | 338,805 | ||||||
41,900 | Unipres Corp. | 706,584 | ||||||
16,700 | United Arrows, Ltd. | 532,128 | ||||||
23,800 | Universal Entertainment Corp. | 693,533 | ||||||
59,150 | XEBIO Holdings Co., Ltd. | 680,516 | ||||||
114,603 | Yamaha Motor Co., Ltd. | 2,237,474 | ||||||
30,700 | Yume No Machi Souzou Iinkai Co., Ltd. | 357,282 | ||||||
62,200 | ZOZO, Inc. | 1,139,570 | ||||||
55,113,974 | ||||||||
Consumer Staples — 5.2% | ||||||||
10,200 | Ain Holdings, Inc. | 731,289 | ||||||
133,774 | Ajinomoto Co., Inc. | 2,377,042 | ||||||
42,893 | Asahi Group Holdings, Ltd. | 1,662,268 | ||||||
11,600 | BELC Co., Ltd. | 544,113 | ||||||
22,090 | Cawachi, Ltd. | 363,900 | ||||||
10,488 | Cocokara Fine, Inc. | 510,869 | ||||||
101,000 | Itoham Yonekyu Holdings, Inc. | 610,815 | ||||||
160,562 | Japan Tobacco, Inc. | 3,815,129 | ||||||
19,000 | Kobe Bussan Co., Ltd. | 559,677 | ||||||
47,236 | Seven & I Holdings Co., Ltd. | 2,052,646 | ||||||
31,300 | Sundrug Co., Ltd. | 932,087 | ||||||
17,300 | Warabeya Nichiyo Holdings Co., Ltd. | 303,015 | ||||||
14,462,850 | ||||||||
Energy — 1.4% | ||||||||
23,970 | Cosmo Energy Holdings Co., Ltd. | 486,650 | ||||||
18,100 | Idemitsu Kosan Co., Ltd. | 588,733 | ||||||
201,917 | Inpex Corp. | 1,789,150 | ||||||
60,670 | Japan Petroleum Exploration Co., Ltd. | 1,075,522 | ||||||
3,940,055 | ||||||||
Financials — 14.0% | ||||||||
24,000 | Aruhi Corp. | 435,206 | ||||||
12,227 | Bank of Kyoto, Ltd. | 502,467 | ||||||
127,590 | Dai-ichi Life Holdings Co., Inc. | 1,981,427 | ||||||
58,680 | Ichiyoshi Securities Co., Ltd. | 430,247 | ||||||
19,240 | JAFCO Co., Ltd. | 609,491 | ||||||
5,100 | M&A Capital Partners Co., Ltd.* | 175,630 | ||||||
1,924,656 | Mitsubishi UFJ Financial Group, Inc. | 9,445,547 | ||||||
2,093,970 | Mizuho Financial Group, Inc. | 3,239,868 | ||||||
56,594 | MS&AD Insurance Group Holdings, Inc. | 1,608,701 | ||||||
357,600 | Nomura Holdings, Inc. | 1,355,165 | ||||||
117,766 | San-In Godo Bank, Ltd. | 822,540 | ||||||
57,093 | Sony Financial Holdings, Inc. | 1,064,019 | ||||||
104,770 | Sumitomo Mitsui Financial Group, Inc. | 3,453,750 | ||||||
92,322 | Sumitomo Mitsui Trust Holdings, Inc. | 3,362,087 | ||||||
330,580 | T&D Holdings, Inc. | 3,823,995 | ||||||
117,830 | Tochigi Bank, Ltd. | 268,580 | ||||||
85,453 | Tokio Marine Holdings, Inc. | 4,059,762 | ||||||
26,430 | Tokyo Kiraboshi Financial Group, Inc. | 406,757 | ||||||
43,709 | Zenkoku Hosho Co., Ltd. | 1,370,730 | ||||||
38,415,969 |
The accompanying notes are an integral part of these financial statements.
81
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 93.3% (Continued) | ||||||||
Japan — 93.3% (Continued) | ||||||||
Health Care — 5.5% | ||||||||
15,100 | Asahi Intecc Co., Ltd. | 638,812 | ||||||
16,970 | CMIC Holdings Co., Ltd. | 266,134 | ||||||
20,060 | Eisai Co., Ltd. | 1,553,042 | ||||||
43,300 | Elan Corp. | 531,607 | ||||||
34,500 | EPS Holdings, Inc. | 525,424 | ||||||
60,615 | Japan Lifeline Co., Ltd. | 781,304 | ||||||
31,700 | Kyowa Hakko Kirin Co., Ltd. | 599,006 | ||||||
30,300 | Nippon Shinyaku Co., Ltd. | 1,920,458 | ||||||
234,103 | Nipro Corp. | 2,863,794 | ||||||
21,600 | Olympus Corp. | 660,631 | ||||||
104,703 | ONO Pharmaceutical Co., Ltd. | 2,138,109 | ||||||
75,270 | Takeda Pharmaceutical Co., Ltd. | 2,551,239 | ||||||
15,029,560 | ||||||||
Industrials — 16.9% | ||||||||
13,583 | Aeon Delight Co., Ltd. | 453,192 | ||||||
95,240 | Amada Holdings Co., Ltd. | 854,959 | ||||||
100,860 | Chiyoda Corp. | 283,401 | ||||||
37,000 | Daiseki Co., Ltd. | 764,102 | ||||||
52,400 | DMG Mori Co., Ltd. | 588,539 | ||||||
546,826 | Hazama Ando Corp. | 3,610,439 | ||||||
26,640 | Hisaka Works, Ltd. | 198,535 | ||||||
32,100 | IHI Corp. | 884,087 | ||||||
121,416 | ITOCHU Corp. | 2,061,982 | ||||||
28,100 | Jamco Corp. | 650,161 | ||||||
27,657 | Japan Airlines Co., Ltd. | 980,194 | ||||||
29,600 | Japan Elevator Service Holdings Co., Ltd. | 441,226 | ||||||
31,760 | Japan Steel Works, Ltd. | 508,333 | ||||||
148,939 | JGC Corp. | 2,096,211 | ||||||
66,116 | Kawasaki Heavy Industries, Ltd. | 1,410,896 | ||||||
36,585 | Kinden Corp. | 592,359 | ||||||
38,088 | Kumagai Gumi Co., Ltd. | 1,144,541 | ||||||
21,900 | Kyowa Exeo Corp. | 512,793 | ||||||
40,600 | Kyudenko Corp. | 1,538,659 | ||||||
62,100 | Maeda Corp. | 579,894 | ||||||
100,351 | MinebeaMitsumi, Inc. | 1,447,063 | ||||||
62,300 | Mirait Holdings Corp. | 911,546 | ||||||
23,400 | Mitsubishi Corp. | 641,547 | ||||||
45,100 | Mitsubishi Electric Corp. | 497,345 | ||||||
73,600 | Mitsubishi Heavy Industries, Ltd. | 2,640,942 | ||||||
261,610 | NGK Insulators, Ltd. | 3,545,873 | ||||||
45,600 | Nippon Yusen K.K. | 697,276 | ||||||
86,500 | Nissin Electric Co., Ltd. | 629,214 | ||||||
17,352 | Noritz Corp. | 247,881 | ||||||
49,550 | Persol Holdings Co., Ltd. | 734,998 | ||||||
107,751 | Sanwa Holdings Corp. | 1,223,396 | ||||||
15,040 | Shima Seiki Manufacturing, Ltd. | 437,235 | ||||||
9,168 | SHO-BOND Holdings Co., Ltd. | 679,608 | ||||||
2,328 | SMC Corp. | 700,897 | ||||||
28,400 | SMS Co., Ltd. | 449,652 | ||||||
113,534 | Tadano, Ltd. | 1,027,863 | ||||||
31,753 | Taisei Corp. | 1,359,930 | ||||||
54,385 | Takuma Co., Ltd. | 681,070 | ||||||
23,560 | TechnoPro Holdings, Inc. | 967,897 | ||||||
47,402 | THK Co., Ltd. | 885,559 | ||||||
82,090 | Toppan Forms Co., Ltd. | 644,821 | ||||||
28,742 | Toshiba Machine Co., Ltd. | 511,538 | ||||||
36,811 | Toshiba Plant Systems & Services Corp. | 677,522 | ||||||
69,390 | Toyo Engineering Corp.* | 403,354 | ||||||
57,300 | Trusco Nakayama Corp. | 1,510,776 | ||||||
17,280 | Tsubaki Nakashima Co., Ltd. | 254,316 | ||||||
89,960 | Ushio, Inc. | 953,074 | ||||||
27,100 | UT Group Co., Ltd.* | 465,230 | ||||||
42,900 | Yokogawa Bridge Holdings Corp. | 638,678 | ||||||
46,620,604 | ||||||||
Information Technology — 11.5% | ||||||||
3,326 | Alpha Systems, Inc. | 75,772 | ||||||
65,030 | Canon, Inc. | 1,789,346 | ||||||
213,090 | Citizen Watch Co., Ltd. | 1,049,426 | ||||||
10,910 | Cresco, Ltd. | 288,368 | ||||||
10,483 | DTS Corp. | 334,983 | ||||||
28,965 | Enplas Corp. | 718,652 | ||||||
100,247 | Ferrotec Holdings Corp. | 716,803 | ||||||
25,900 | FUJIFILM Holdings Corp. | 1,004,001 | ||||||
67,477 | Fujitsu, Ltd. | 4,206,257 | ||||||
87,486 | Hitachi High-Technologies Corp. | 2,739,572 | ||||||
61,500 | Hitachi, Ltd. | 1,630,381 | ||||||
48,440 | Hosiden Corp. | 317,084 | ||||||
79,060 | Ibiden Co., Ltd. | 1,111,035 | ||||||
75,428 | Kyocera Corp. | 3,770,275 | ||||||
51,000 | LAC Co., Ltd. | 624,106 | ||||||
189,861 | Maxell Holdings, Ltd. | 2,503,969 | ||||||
9,580 | Melco Holdings, Inc. | 287,044 | ||||||
19,720 | Miraial Co., Ltd. | 160,139 | ||||||
98,300 | Nichicon Corp. | 709,955 | ||||||
34,900 | Nippon Ceramic Co., Ltd. | 746,837 | ||||||
11,860 | ORO Co., Ltd. | 442,603 | ||||||
25,443 | Rohm Co., Ltd. | 1,623,900 | ||||||
12,731 | SCREEN Holdings Co., Ltd. | 533,741 | ||||||
27,700 | SCSK Corp. | 981,511 | ||||||
16,600 | Shibaura Electronics Co., Ltd. | 521,126 | ||||||
49,480 | Shinko Electric Industries Co., Ltd. | 315,262 | ||||||
59,400 | SIIX Corp. | 771,852 | ||||||
44,100 | TechMatrix Corp. | 670,978 | ||||||
31,380 | Tokyo Seimitsu Co., Ltd. | 790,586 | ||||||
16,300 | Yamaichi Electronics Co., Ltd. | 173,541 | ||||||
31,609,105 | ||||||||
Materials — 8.3% | ||||||||
61,421 | ADEKA Corp. | 887,937 | ||||||
27,410 | Chubu Steel Plate Co., Ltd. | 142,116 | ||||||
106,949 | Daicel Corp. | 1,097,899 | ||||||
36,500 | Denka Co., Ltd. | 1,027,325 | ||||||
22,842 | Fujimi, Inc. | 437,123 | ||||||
189,550 | Hitachi Metals, Ltd. | 1,971,421 | ||||||
198,967 | JSR Corp. | 2,986,601 | ||||||
91,519 | Kanto Denka Kogyo Co., Ltd. | 662,394 | ||||||
44,725 | KH Neochem Co., Ltd. | 940,809 | ||||||
58,680 | Kyoei Steel, Ltd. | 885,100 | ||||||
81,620 | Nakayama Steel Works, Ltd. | 354,473 | ||||||
29,290 | Neturen Co., Ltd. | 223,093 | ||||||
25,400 | Pacific Metals Co., Ltd. | 616,751 |
The accompanying notes are an integral part of these financial statements.
82
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 93.3% (Continued) | ||||||||
Japan — 93.3% (Continued) | ||||||||
Materials — 8.3% (Continued) | ||||||||
57,106 | Shin-Etsu Chemical Co., Ltd. | 4,387,616 | ||||||
37,800 | Tokuyama Corp. | 829,588 | ||||||
24,600 | Tokyo Ohka Kogyo Co., Ltd. | 658,434 | ||||||
220,540 | Tokyo Steel Manufacturing Co., Ltd. | 1,786,356 | ||||||
50,500 | Toyobo Co., Ltd. | 687,531 | ||||||
8,500 | Tri Chemical Laboratories, Inc. | 296,372 | ||||||
83,442 | Yamato Kogyo Co., Ltd. | 1,950,269 | ||||||
22,829,208 | ||||||||
Real Estate — 2.1% | ||||||||
4,365 | Daito Trust Construction Co., Ltd. | 597,584 | ||||||
372,200 | Ichigo, Inc. | 1,078,432 | ||||||
160,100 | Kenedix, Inc. | 686,731 | ||||||
216,312 | Mitsubishi Estate Co., Ltd. | 3,403,347 | ||||||
5,766,094 | ||||||||
Utilities — 0.2% | ||||||||
12,800 | Nippon Gas Co., Ltd. | 463,823 | ||||||
Total Common Stocks (Cost $251,767,108) | 256,721,994 | |||||||
Real Estate Investment Trusts — 0.8% | ||||||||
Japan — 0.8% | ||||||||
58 | Hoshino Resorts, Inc. | 274,710 | ||||||
1,871 | LaSalle Logiport | 1,811,512 | ||||||
Total Real Estate Investment Trusts (Cost $2,183,046) | 2,086,222 | |||||||
Exchange Traded Funds — 0.3% | ||||||||
Japan — 0.3% | ||||||||
68,010 | Nomura AM TOPIX ETF | 954,479 | ||||||
Total Exchange Traded Funds (Cost $937,812) | 954,479 | |||||||
Short-Term Investments — 0.0% | ||||||||
Money Market Funds — 0.0% | ||||||||
590 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 590 | |||||||
Total Short-Term Investments (Cost $590) | 590 | |||||||
Total Investments — 94.4% (Cost $254,888,556) | 259,763,285 | |||||||
Other Assets in Excess of Liabilities — 5.6% | 15,385,306 | |||||||
NET ASSETS — 100.0% | $ | 275,148,591 |
* | Non-Income Producing |
# | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Consumer Discretionary | 20.0% |
Industrials | 16.9% |
Financials | 14.0% |
Information Technology | 11.5% |
Materials | 8.3% |
Communication Services | 8.2% |
Health Care | 5.5% |
Consumer Staples | 5.2% |
Real Estate | 2.1% |
Energy | 1.4% |
Real Estate Investment Trusts | 0.8% |
Exchange Traded Funds | 0.3% |
Utilities | 0.2% |
Money Market Funds | 0.0% |
Other Assets and Liabilities | 5.6% |
100.0% |
Futures Contracts — Long (Note 6)
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
TOPIX Index Futures^ | 164 | 03/07/2019 | $ | 22,108,173 | $ | 22,346,973 | $ | 238,800 |
^ | Contracts are denominated in Japanese Yen. Notional amount, notional value and unrealized appreciation (depreciation) have been translated into U.S. Dollars as of December 31, 2018. |
There is $4,462 of variation margin due to the broker from the Fund as of December 31, 2018.
Forward Foreign Currency Exchange Contracts (Note 7)
Unrealized | |||||||||||||||
Appreciation | |||||||||||||||
Currency to be Delivered | Currency to be Received | Settlement Date | Counterparty | (Depreciation) | |||||||||||
U.S. Dollars | (13,537,377 | ) | Japanese Yen | 1,505,600,000 | 01/31/2019 | ANZ Securities, Inc. | $ | 234,096 |
The accompanying notes are an integral part of these financial statements.
83
Brown Advisory – Somerset Emerging Markets Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory – Somerset Emerging Markets Fund – Institutional Shares (the “Fund”) decreased 11.00% in value. During the same period, the MSCI Emerging Markets Index (the “Index”), the Fund’s benchmark, decreased 8.48%.
For the six months ended December 31, 2018, the Fund’s sensitivity to foreign policy risk was a significant obstacle to performance. We do think about foreign policy risk when we construct the portfolio, which contributed to our decision to limit exposure in Russia to a maximum of 10%, for example. However, the erratic and unpredictable nature of Donald Trump’s aggressive foreign policy agenda has been difficult to anticipate, and has had a material impact on some of our holdings – especially in Russia, Korea and Turkey.
From an individual stock perspective, the top contributor was Porto Seguro (+0.70% contribution in absolute terms), which has been Brazil’s dominant premium auto insurer. Performance of the stock was driven by the reporting of strong 2Q18 results, plus an additional boost from a meaningful drop in theft and robbery (down 8%) in Sao Paolo in July. Further, rising demand for mortgages, a strong domestic economy and supportive monetary policy underpinned OTP Bank’s positive contribution (+0.50% in absolute terms). We were also pleased with the performance of Indian consumer staples company Britannia Industries (+0.34% in absolute terms), a recent addition to the portfolio, which has been executing on a strategy of transitioning from a biscuit specialist to a total foods company. The largest detractors were semiconductor manufacturers SK Hynix (-3.27% absolute contribution) and Samsung Electronics (-2.23% absolute contribution) which were hit by negative sentiment related to the Sino-US trade dispute as well as a forecast decline in dynamic random access memory demand in 2019.
We made six buys and fifteen sells during the second half of 2018. Part of the reason is that outflows from the portfolio were used efficiently to help reposition the portfolio, minimizing trading costs. Buys included a number of Indian stocks such as Housing Development Finance Corporation (“HDFC”), property developer Prestige Estates Projects, Maruti Suzuki India and Britannia Industries. In particular, we initiated our positions in HDFC and Prestige Estates based on a strong outlook for Indian property and property finance fueled by underlying demand for housing and recent reforms put through the sector. On the other hand, we sold Indian two-wheeler company Hero Motocorp due to deteriorating conditions in that market as Indian consumers increasingly favor passenger vehicles; we have rotated into Maruti Suzuki, which has been the strongest player in that sector.
We believe that the portfolio is well positioned within a challenging environment to have the potential to deliver attractive risk adjusted returns from here. Recent volatility has provided an opportunity to double down on quality companies, such as the dominant Brazilian brewer Ambev which was down approximately 30% in September and October last year, while key contrarian names such as SK Hynix and Sberbank are trading at what we believe to be heavily discounted prices and are capable of meaningful upside. We are also content with our large underweight to China, given the considerable downside risk associated with excess levels of Chinese corporate debt, falling consumer confidence, slowing industrial output, weakening credit expansion and a cooling property market – all exacerbated by the Sino-U.S. trade dispute.
Looking ahead, while we believe that the U.S. twin deficit signals a potential major inflection point for emerging markets, Trump’s aggressive economic warfare and questions over the path of U.S. monetary policy have put the bull market on hold for the time being. It is very difficult to say with any certainty when the volatile global political backdrop will change, but given the quality of the companies we have in the portfolio and the valuations on offer, we think now certainly is not the time to be selling emerging markets.
Sincerely,
Edward Lam
Portfolio Manager
84
Brown Advisory – Somerset Emerging Markets Fund
A Message to Our Shareholders
December 31, 2018
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.
85
Brown Advisory – Somerset Emerging Markets Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 101.1% | ||||||||
Brazil — 8.8% | ||||||||
2,089,071 | Ambev S.A. | 8,278,125 | ||||||
778,479 | Porto Seguro S.A. | 10,480,801 | ||||||
18,758,926 | ||||||||
Chile — 5.8% | ||||||||
2,445,598 | AFP Habitat S.A.† | 3,206,412 | ||||||
707,984 | Cia Cervecerias Unidas S.A.† | 9,114,428 | ||||||
12,320,840 | ||||||||
China — 8.7% | ||||||||
4,329,216 | CNOOC, Ltd. | 6,668,391 | ||||||
1,013,695 | Henderson Land Development Co., Ltd | 5,045,223 | ||||||
79,760 | Kweichow Moutai Co., Ltd. | 6,889,567 | ||||||
18,603,181 | ||||||||
Germany — 0.8% | ||||||||
70,294 | Hapag-Lloyd AG† | 1,805,097 | ||||||
Greece — 2.3% | ||||||||
3,252,462 | Alpha Bank AE* | 4,091,117 | ||||||
860,708 | Piraeus Bank S.A.* | 827,673 | ||||||
4,918,790 | ||||||||
Hungary — 9.0% | ||||||||
738,636 | MOL Hungarian Oil & Gas PLC | 8,106,062 | ||||||
275,763 | OTP Bank | 11,144,434 | ||||||
19,250,496 | ||||||||
India — 15.8% | ||||||||
82,433 | Britannia Industries, Ltd. | 3,675,308 | ||||||
384,053 | HCL Technologies, Ltd. | 5,306,983 | ||||||
352,043 | Housing Development Finance Corp., Ltd. | 9,918,562 | ||||||
85,031 | Maruti Suzuki India, Ltd. | 9,085,796 | ||||||
2,002,091 | Power Grid Corp. of India, Ltd. | 5,694,457 | ||||||
15,041 | Prestige Estates Projects, Ltd. | 47,340 | ||||||
33,728,446 | ||||||||
Indonesia — 1.1% | ||||||||
8,146,719 | AKR Corporindo Tbk PT | 2,432,420 | ||||||
Netherlands — 3.3% | ||||||||
284,487 | X5 Retail Group NV GDR | 7,049,588 | ||||||
Nigeria — 1.0% | ||||||||
108,199,854 | Access Bank PLC† | 2,024,096 | ||||||
Philippines — 0.3% | ||||||||
843,592 | Aboitiz Power Corp. | 562,466 | ||||||
Poland — 1.3% | ||||||||
230,089 | Powszechny Zaklad Ubezpieczen S.A. | 2,710,815 | ||||||
Russia — 3.9% | ||||||||
753,932 | Sberbank of Russia PJSC ADR | 8,263,095 | ||||||
South Africa — 6.3% | ||||||||
1,452,434 | Sanlam, Ltd. | 8,045,312 | ||||||
402,344 | Shoprite Holdings, Ltd. | 5,314,812 | ||||||
13,360,124 | ||||||||
South Korea — 14.8% | ||||||||
261,650 | Nexen Tire Corp.* | 2,150,323 | ||||||
327,950 | Samsung Electronics Co., Ltd. | 11,416,503 | ||||||
23,626 | Samsung Fire & Marine Insurance Co., Ltd.* | 5,681,090 | ||||||
224,864 | SK Hynix, Inc. | 12,258,802 | ||||||
31,506,718 | ||||||||
Taiwan — 7.0% | ||||||||
200,613 | eMemory Technology, Inc. | 1,712,098 | ||||||
1,115,000 | Nanya Technology Corp. | 1,996,760 | ||||||
557,000 | President Chain Store Corp. | 5,611,780 | ||||||
373,750 | Taiwan Semiconductor | |||||||
Manufacturing Co., Ltd. | 2,713,886 | |||||||
748,584 | Win Semiconductors Corp. | 2,883,842 | ||||||
14,918,366 | ||||||||
Turkey — 2.3% | ||||||||
1,699,035 | Aksa Akrilik Kimya Sanayii A/S† | 2,394,645 | ||||||
2,142,406 | Anadolu Hayat Emeklilik A/S† | 2,431,496 | ||||||
4,826,141 | ||||||||
United Arab Emirates — 4.4% | ||||||||
1,991,758 | First Abu Dhabi Bank | 7,645,528 | ||||||
1,432,787 | Union National Bank | 1,824,921 | ||||||
9,470,449 | ||||||||
United Kingdom — 3.3% | ||||||||
207,138 | Coca-Cola HBC AG* | 6,482,942 | ||||||
70,886 | HSBC Holdings PLC | 584,908 | ||||||
7,067,850 | ||||||||
United States — 0.9% | ||||||||
265,600 | Transocean, Ltd.* | 1,843,264 | ||||||
Total Common Stocks (Cost $192,811,802) | 215,421,168 | |||||||
Short-Term Investments — 0.0% | ||||||||
Money Market Funds — 0.0% | ||||||||
648 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 648 | |||||||
Total Short-Term Investments (Cost $648) | 648 | |||||||
Total Investments — 101.1% (Cost $192,812,450) | 215,421,816 | |||||||
Liabilities in Excess of Other Assets — (1.1)% | (2,377,160 | ) | ||||||
NET ASSETS — 100.0% | $ | 213,044,656 |
† | All or a portion of this security is considered illiquid. At December 31, 2018 the total market value of securities considered illiquid was $10,331,122 or 4.8% of net assets. |
# | Annualized seven-day yield as of December 31, 2018. |
* | Non-Income Producing |
GDR — Global Depositary Receipt
ADR — American Depositary Receipt
The accompanying notes are an integral part of these financial statements.
86
Brown Advisory – Somerset Emerging Markets Fund
Schedule of Investments
December 31, 2018 (Unaudited)
PORTFOLIO HOLDINGS
% of Net Assets
India | 15.8% |
South Korea | 14.8% |
Hungary | 9.0% |
Brazil | 8.8% |
China | 8.7% |
Taiwan | 7.0% |
South Africa | 6.3% |
Chile | 5.8% |
United Arab Emirates | 4.4% |
Russia | 3.9% |
United Kingdom | 3.3% |
Netherlands | 3.3% |
Greece | 2.3% |
Turkey | 2.3% |
Poland | 1.3% |
Indonesia | 1.1% |
Nigeria | 1.0% |
United States | 0.9% |
Germany | 0.8% |
Philippines | 0.3% |
Money Market Funds | 0.0% |
Other Assets and Liabilities | (1.1)% |
100.0% |
The accompanying notes are an integral part of these financial statements.
87
Brown Advisory – Beutel Goodman Large-Cap Value Fund
A Message to Our Shareholders
December 31, 2018
Dear Shareholder:
During the six-month period ended December 31, 2018, the Brown Advisory – Beutel Goodman Large-Cap Value Fund – Institutional Shares (the “Fund”) decreased 3.74% in value. During the same period, the Russell 1000® Value Index (the “Index”), the Fund’s benchmark, decreased 6.69%.
The Index gained gradually over the first three months of the period, despite ongoing trade tensions between the U.S. and its global trading partners, amid brief moments of pause in the performance of some of the high-flying growth names within the Index. The momentum that had been seen for several quarters returned, driven by a strong corporate earnings season, solid economic backdrop and the positive impact of tax reform. Then the wheels fell off in October. Economic data came in a little softer, political and trade tensions escalated, oil prices started a death spiral, and monetary policy commentary showed signs of tightening. Underperforming sectors included the commodity influenced materials and energy sectors, as well as industrials, consumer discretionary and financials, the latter of which trailed the broader market for the third consecutive quarter.
Stock selection was the primary driver of outperformance in the Fund for the six-month period under review. Our industrials names contributed the most significant amount of value, offsetting the negative impact of our overweight position in the sector. Communication services was the strongest overall contributor, due to both stock selection and the Fund’s relative overweight position. Sector weighting effects were positive over the period, driven primarily by underweights in energy and financials, as well as overweight positions in communication services and consumer staples.
From an individual stock perspective, health care holdings Eli Lilly and Merck generated positive returns for the portfolio, as fundamentals and sentiment in the pharmaceutical space continued to improve. This was partially offset by weakness in drug distributor AmerisourceBergen, which was impacted by negative news flow across its retail customer end markets. In the consumer discretionary sector, AutoZone outperformed, while Harley-Davidson continued struggling, underperforming the market as the company’s topline challenges were compounded by a cautious tone from management for 2019. Cereal and snack manufacturer Kellogg Company trailed the market as well as its peers following analyst day margin guidance from management that disappointed investors despite solid top-line results. In communications services, Verizon was a top contributor. With valuations that we believe are very cheap, the market responded positively to earnings that exceeded expectations. Comcast also added value under similar circumstances. Oil-field service provider Halliburton was the largest detractor from performance over the period as its energy exposure reflected the impact of oil prices reaching two-year lows. Pump manufacturer Flowserve detracted for similar reasons. Other positions in the portfolio that were also negatively affected by the falling oil price were LyondellBasell and Parker-Hannifin.
New positions added over the period included Blackrock Inc., the largest asset management platform in the world, as well as Cummins Inc., the world’s largest independent engine manufacturer. The Fund also added positions in Kimberly-Clark, a global manufacturer of paper based consumer hygiene products, and KLA-Tencor, the dominant supplier of process control, alignment and defect inspection technology used in the manufacture of semiconductors.
In addition to the Fund’s four new names, we added to existing positions in Ameriprise, Amgen and Symantec. In the case of Ameriprise, our increased weighting reflects continued high conviction in this high-quality franchise, with valuations near all-time low levels. Additions to Amgen, a new holding added to the Fund in the first half of 2018, occurred after a pullback following strong performance shortly after our initiation. Symantec’s weight was increased to better reflect what we believe to be an attractive risk-adjusted return opportunity. We also added to Omnicom, Harley-Davidson, Comcast and Halliburton as valuations provided what we believe to be attractive risk adjusted return opportunities.
We completed process-driven one-third sales in Eli Lilly, Merck and Ingersoll-Rand after the stocks increased to hit their price targets. To help fund the new names noted above, we sold Procter & Gamble, Johnson & Johnson and Allegion in their entirety, as all three offered minimal upside with increasing downside risk from valuation. Additional sources of funds came from AutoZone, LyondellBasell, Parker Hannifin, Oracle and Verizon, all of which we continue to hold at this time with what we believe to be positive risk-reward potential.
Looking ahead, there is no shortage of risks that may weigh on the markets, including gridlock in Washington and growing concerns about global trade. However, as bottom-up stock pickers, we generally ignore the short-term noise and focus entirely on fundamentals. We believe that the best form of risk control is to know what you own and what it is worth. The only factors we can control to potentially protect investor capital on the downside as we attempt to deliver attractive long-term returns are finding great franchises we want to own forever, ensuring we pay the right price for them, and maintaining the sell discipline to lock in gains when we believe they are fully valued.
88
Brown Advisory – Beutel Goodman Large-Cap Value Fund
A Message to Our Shareholders
December 31, 2018
As a result, we are quite optimistic as we move into 2019. We added a number of high-quality businesses to the portfolio in the last six months of 2018 at what we believe to be attractive valuations, and in our view, the portfolio is well-positioned both on a fundamental basis and versus the market. This does not necessarily mean U.S. equity markets will broadly outperform this year, and we still believe that large parts of the market are overvalued, but it gives us significant confidence in our outlook for the portfolio. In addition, the list of great franchises that meet our high and strict investment guidelines and return thresholds is growing, and we believe that equity valuations look more attractive following the fourth-quarter rout.
Sincerely,
Rui Cardoso, CFA
Portfolio Manager
Glenn Fortin, CFA
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. In addition, the Fund is susceptible to risks from investments in derivatives, private placements, REITs, and its investments in other investment companies. The Fund is non-diversified, which means that it may invest a significant portion of its assets in the securities of a single issuer or small number of issuers. Investment by the Fund in securities of a limited number of issuers exposes it to greater risk and potential monetary losses than if its assets were diversified among the securities of a greater number of issuers. If a Fund is non-diversified, then its investments are not required to meet certain requirements under Federal law. A non-diversified fund is permitted to invest a greater percentage of its assets in the securities of a single issuer than a diversified fund. Thus, the Fund may have fewer holdings than other funds. As a result, a decline in the value of those investments would cause the Fund’s overall value to decline to a greater degree than if the Fund held a more diversified portfolio. The risks of derivatives include imperfect correlation between the value of the 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 ad risks that the derivative transactions may not be liquid.
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.
89
Brown Advisory – Beutel Goodman Large-Cap Value Fund
Schedule of Investments
December 31, 2018 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 95.8% | ||||||||
Communication Services — 16.1% | ||||||||
229,080 | Comcast Corp. | 7,800,174 | ||||||
135,397 | Omnicom Group, Inc. | 9,916,476 | ||||||
221,590 | Verizon Communications, Inc. | 12,457,790 | ||||||
30,174,440 | ||||||||
Consumer Discretionary — 7.8% | ||||||||
9,480 | AutoZone, Inc.* | 7,947,463 | ||||||
196,634 | Harley-Davidson, Inc. | 6,709,152 | ||||||
14,656,615 | ||||||||
Consumer Staples — 11.1% | ||||||||
143,320 | Campbell Soup Co. | 4,728,127 | ||||||
139,496 | Kellogg Co. | 7,952,667 | ||||||
72,270 | Kimberly-Clark Corp. | 8,234,444 | ||||||
20,915,238 | ||||||||
Energy — 2.7% | ||||||||
188,230 | Halliburton Co. | 5,003,153 | ||||||
Financials — 15.0% | ||||||||
102,920 | American Express Co. | 9,810,334 | ||||||
66,930 | Ameriprise Financial, Inc. | 6,985,485 | ||||||
12,410 | BlackRock, Inc. | 4,874,896 | ||||||
39,380 | JPMorgan Chase & Co. | 3,844,276 | ||||||
56,690 | Wells Fargo & Co. | 2,612,275 | ||||||
28,127,266 | ||||||||
Health Care — 12.5% | ||||||||
118,821 | AmerisourceBergen Corp. | 8,840,283 | ||||||
39,530 | Amgen, Inc. | 7,695,305 | ||||||
37,260 | Eli Lilly & Co. | 4,311,727 | ||||||
33,800 | Merck & Co., Inc. | 2,582,658 | ||||||
23,429,973 | ||||||||
Industrials — 12.2% | ||||||||
28,760 | Cummins, Inc. | 3,843,486 | ||||||
105,239 | Flowserve Corp. | 4,001,187 | ||||||
64,510 | Ingersoll-Rand PLC | 5,885,247 | ||||||
62,050 | Parker-Hannifin Corp. | 9,254,137 | ||||||
22,984,057 | ||||||||
Information Technology — 15.7% | ||||||||
112,217 | Amdocs, Ltd. | 6,573,672 | ||||||
78,160 | KLA-Tencor Corp. | 6,994,538 | ||||||
218,420 | Oracle Corp. | 9,861,663 | ||||||
313,900 | Symantec Corp. | 5,931,141 | ||||||
29,361,014 | ||||||||
Materials — 2.7% | ||||||||
60,690 | LyondellBasell Industries NV | 5,046,980 | ||||||
Total Common Stocks (Cost $190,382,189) | 179,698,736 | |||||||
Short-Term Investments — 8.6% | ||||||||
Money Market Funds — 8.6% | ||||||||
16,086,760 | First American Government | |||||||
Obligations Fund — Class Z, 2.32%# | 16,086,760 | |||||||
Total Short-Term Investments (Cost $16,086,760) | 16,086,760 | |||||||
Total Investments — 104.4% (Cost $206,468,949) | 195,785,496 | |||||||
Liabilities in Excess of Other Assets — (4.4)% | (8,264,670 | ) | ||||||
NET ASSETS — 100.0% | $ | 187,520,826 |
* | Non-Income Producing |
# | Annualized seven-day yield as of December 31, 2018. |
PORTFOLIO HOLDINGS
% of Net Assets
Communication Services | 16.1% |
Information Technology | 15.7% |
Financials | 15.0% |
Health Care | 12.5% |
Industrials | 12.2% |
Consumer Staples | 11.1% |
Money Market Funds | 8.6% |
Consumer Discretionary | 7.8% |
Materials | 2.7% |
Energy | 2.7% |
Other Assets and Liabilities | (4.4)% |
100.0% |
The accompanying notes are an integral part of these financial statements.
90
Statements of Assets and Liabilities
December 31, 2018 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | ADVISORY | |||||||||||||
GROWTH | FLEXIBLE | EQUITY | SUSTAINABLE | |||||||||||||
EQUITY | EQUITY | INCOME | GROWTH | |||||||||||||
FUND | FUND | FUND | FUND | |||||||||||||
ASSETS | ||||||||||||||||
Investments: | ||||||||||||||||
Total investments, at cost | $ | 1,119,327,989 | $ | 264,277,694 | $ | 55,448,185 | $ | 587,571,798 | ||||||||
Net unrealized appreciation (depreciation) | 652,004,438 | 136,785,033 | 25,403,382 | 150,760,393 | ||||||||||||
Total investments, at market value | 1,771,332,427 | 401,062,727 | 80,851,567 | 738,332,191 | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold | — | 3,196,351 | — | — | ||||||||||||
Fund shares sold | 4,332,742 | 919,128 | 329,450 | 7,798,025 | ||||||||||||
Interest and dividends | 475,131 | 213,084 | 195,818 | 552,904 | ||||||||||||
Prepaid expenses and other assets | 74,660 | 53,740 | 50,661 | 59,635 | ||||||||||||
Total Assets | 1,776,214,960 | 405,445,030 | 81,427,496 | 746,742,755 | ||||||||||||
LIABILITIES | ||||||||||||||||
Payables: | ||||||||||||||||
Fund shares redeemed | 2,584,343 | 602,223 | 422,836 | 521,861 | ||||||||||||
Distribution to shareholders | — | — | — | 58 | ||||||||||||
Accrued Liabilities: | ||||||||||||||||
Investment advisory fees | 917,156 | 160,381 | 44,092 | 374,663 | ||||||||||||
Service fees | 196,024 | 38,231 | 7,783 | 41,495 | ||||||||||||
Administration, accounting and transfer agent fees | 116,014 | 25,871 | 5,615 | 42,455 | ||||||||||||
Business management fees | 77,587 | 17,924 | 3,674 | 31,222 | ||||||||||||
Trustee fees | 19,346 | 4,356 | 888 | 8,726 | ||||||||||||
Distribution fees | 3,636 | 2,977 | 626 | 130,732 | ||||||||||||
Professional fees | 23,454 | 11,943 | 10,671 | 13,271 | ||||||||||||
Custody fees | 9,828 | 3,451 | 1,378 | 3,515 | ||||||||||||
Other liabilities | 37,859 | 7,790 | 1,048 | 16,146 | ||||||||||||
Total Liabilities | 3,985,247 | 875,147 | 498,611 | 1,184,144 | ||||||||||||
NET ASSETS | $ | 1,772,229,713 | $ | 404,569,883 | $ | 80,928,885 | $ | 745,558,611 | ||||||||
COMPONENTS OF NET ASSETS | ||||||||||||||||
Paid-in capital | $ | 1,080,407,347 | $ | 262,910,909 | $ | 51,783,345 | $ | 582,882,171 | ||||||||
Total distributable earnings (loss) | 691,822,366 | 141,658,974 | 29,145,540 | 162,676,440 | ||||||||||||
NET ASSETS | $ | 1,772,229,713 | $ | 404,569,883 | $ | 80,928,885 | $ | 745,558,611 | ||||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||||||
Institutional Shares: | ||||||||||||||||
Net assets | $ | 275,666,892 | $ | 115,729,073 | $ | 23,636,364 | $ | 422,253,180 | ||||||||
Shares outstanding (unlimited shares authorized) | 14,053,219 | 6,051,095 | 1,974,266 | 20,079,545 | ||||||||||||
Net asset value per share | $ | 19.62 | $ | 19.13 | $ | 11.97 | $ | 21.03 | ||||||||
Investor Shares: | ||||||||||||||||
Net assets | $ | 1,491,285,367 | $ | 284,827,379 | $ | 56,338,343 | $ | 129,119,427 | ||||||||
Shares outstanding (unlimited shares authorized) | 76,898,718 | 14,908,118 | 4,706,809 | 6,209,506 | ||||||||||||
Net asset value per share | $ | 19.39 | $ | 19.11 | $ | 11.97 | $ | 20.79 | ||||||||
Advisor Shares: | ||||||||||||||||
Net assets | $ | 5,277,454 | $ | 4,013,431 | $ | 954,178 | $ | 194,186,004 | ||||||||
Shares outstanding (unlimited shares authorized) | 288,374 | 209,646 | 79,760 | 9,501,630 | ||||||||||||
Net asset value per share | $ | 18.30 | $ | 19.14 | $ | 11.96 | $ | 20.44 |
The accompanying notes are an integral part of these financial statements.
91
Statements of Assets and Liabilities
December 31, 2018 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | ADVISORY | |||||||||||||
�� | MID-CAP | SMALL-CAP | SMALL-CAP | GLOBAL | ||||||||||||
GROWTH | GROWTH | FUNDAMENTAL | LEADERS | |||||||||||||
FUND | FUND | VALUE FUND | FUND | |||||||||||||
ASSETS | ||||||||||||||||
Investments: | ||||||||||||||||
Total investments, at cost | $ | 26,919,057 | $ | 699,181,047 | $ | 917,886,771 | $ | 131,573,920 | ||||||||
Net unrealized appreciation (depreciation) | (1,693,568 | ) | 82,032,926 | 56,171,152 | 4,154,852 | |||||||||||
Total investments, at market value | 25,225,489 | 781,213,973 | 974,057,923 | 135,728,772 | ||||||||||||
Cash | 269,436 | — | — | — | ||||||||||||
Foreign currency (Cost of $—, $—, $— and $91,340, respectively.) | — | — | — | 91,340 | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold | — | 4,200,692 | — | — | ||||||||||||
Fund shares sold | 1,023,597 | 6,736,029 | 3,396,176 | 4,389,558 | ||||||||||||
Interest and dividends | 8,443 | 261,242 | 1,608,834 | 80,635 | ||||||||||||
Prepaid expenses and other assets | 33,892 | 74,621 | 50,441 | 41,777 | ||||||||||||
Total Assets | 26,560,857 | 792,486,557 | 979,113,374 | 140,332,082 | ||||||||||||
LIABILITIES | ||||||||||||||||
Payables: | ||||||||||||||||
Investments purchased | — | 5,087,788 | 5,327,129 | 473,348 | ||||||||||||
Fund shares redeemed | — | 4,488,345 | 9,437,729 | 264,232 | ||||||||||||
Interest expense due on line of credit | 100 | — | — | — | ||||||||||||
Accrued Liabilities: | ||||||||||||||||
Investment advisory fees, net | 1,950 | 590,707 | 768,113 | 41,856 | ||||||||||||
Service fees | 329 | 55,320 | 73,803 | 1,337 | ||||||||||||
Administration, accounting and transfer agent fees | 2,205 | 54,130 | 69,643 | 10,076 | ||||||||||||
Business management fees | 1,101 | 34,747 | 45,183 | 5,783 | ||||||||||||
Trustee fees | 136 | 11,874 | 12,020 | 1,678 | ||||||||||||
Distribution fees | — | 10,649 | 12,856 | — | ||||||||||||
Professional fees | 10,170 | 16,591 | 13,791 | 10,972 | ||||||||||||
Custody fees | 3,536 | 4,696 | 5,415 | 16,752 | ||||||||||||
Other liabilities | 950 | 17,612 | 29,757 | 3,735 | ||||||||||||
Total Liabilities | 20,477 | 10,372,459 | 15,795,439 | 829,769 | ||||||||||||
NET ASSETS | $ | 26,540,380 | $ | 782,114,098 | $ | 963,317,935 | $ | 139,502,313 | ||||||||
COMPONENTS OF NET ASSETS | ||||||||||||||||
Paid-in capital | $ | 28,473,942 | $ | 698,241,734 | $ | 890,917,322 | $ | 137,914,885 | ||||||||
Total distributable earnings (loss) | (1,933,562 | ) | 83,872,364 | 72,400,613 | 1,587,428 | |||||||||||
NET ASSETS | $ | 26,540,380 | $ | 782,114,098 | $ | 963,317,935 | $ | 139,502,313 | ||||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||||||
Institutional Shares: | ||||||||||||||||
Net assets | $ | 24,333,473 | $ | 365,558,813 | $ | 442,209,173 | $ | 127,983,705 | ||||||||
Shares outstanding (unlimited shares authorized) | 2,434,037 | 10,837,098 | 20,457,707 | 10,097,482 | ||||||||||||
Net asset value per share | $ | 10.00 | $ | 33.73 | $ | 21.62 | $ | 12.67 | ||||||||
Investor Shares: | ||||||||||||||||
Net assets | $ | 2,206,907 | $ | 401,757,161 | $ | 504,166,890 | $ | 11,518,608 | ||||||||
Shares outstanding (unlimited shares authorized) | 220,939 | 23,790,229 | 23,324,329 | 908,939 | ||||||||||||
Net asset value per share | $ | 9.99 | $ | 16.89 | $ | 21.62 | $ | 12.67 | ||||||||
Advisor Shares: | ||||||||||||||||
Net assets | $ | — | $ | 14,798,124 | $ | 16,941,872 | $ | — | ||||||||
Shares outstanding (unlimited shares authorized) | — | 915,792 | 786,327 | — | ||||||||||||
Net asset value per share | $ | — | $ | 16.16 | $ | 21.55 | $ | — |
The accompanying notes are an integral part of these financial statements.
92
Statements of Assets and Liabilities
December 31, 2018 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | ADVISORY | |||||||||||||
INTERMEDIATE | TOTAL | STRATEGIC | SUSTAINABLE | |||||||||||||
INCOME | RETURN | BOND | BOND | |||||||||||||
FUND | FUND | FUND | FUND | |||||||||||||
ASSETS | ||||||||||||||||
Investments: | ||||||||||||||||
Total investments – unaffiliated, at cost | $ | 104,736,627 | $ | 182,113,383 | $ | 187,943,273 | $ | 94,041,324 | ||||||||
Total investments – affiliated, at cost (Note 3) | 27,356,612 | — | — | — | ||||||||||||
Total cost of investments | 132,093,239 | 182,113,383 | 187,943,273 | 94,041,324 | ||||||||||||
Net unrealized appreciation (depreciation) – unaffiliated | (779,646 | ) | (2,010,030 | ) | (3,389,230 | ) | (450,844 | ) | ||||||||
Net unrealized appreciation (depreciation) – affiliated (Note 3) | (1,001,617 | ) | — | — | — | |||||||||||
Total unrealized appreciation (depreciation) | (1,781,263 | ) | (2,010,030 | ) | (3,389,230 | ) | (450,844 | ) | ||||||||
Total investments – unaffiliated, at market value | 103,956,981 | 180,103,353 | 184,554,043 | 93,590,480 | ||||||||||||
Total investments – affiliated, at market value (Note 3) | 26,354,995 | — | — | — | ||||||||||||
Total investments, at market value | 130,311,976 | 180,103,353 | 184,554,043 | 93,590,480 | ||||||||||||
Cash deposit at broker – futures contracts (Note 6) | — | — | 97,760 | 124,236 | ||||||||||||
Gross unrealized appreciation – futures contracts (Note 6) | — | 1,641,076 | — | 422,666 | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold | 91,088 | 117,364 | 156,820 | — | ||||||||||||
Fund shares sold | 75,000 | 1,868,500 | 2,039,100 | 465,000 | ||||||||||||
Interest and dividends | 694,580 | 1,325,126 | 1,643,368 | 666,623 | ||||||||||||
Prepaid expenses and other assets | 32,705 | 38,852 | 39,564 | 33,490 | ||||||||||||
Total Assets | 131,205,349 | 185,094,271 | 188,530,655 | 95,302,495 | ||||||||||||
LIABILITIES | ||||||||||||||||
Cash deficit at broker – futures contracts (Note 6) | — | 18,591 | — | — | ||||||||||||
Gross unrealized depreciation – futures contracts (Note 6) | — | 156,239 | — | 369,144 | ||||||||||||
Payables: | ||||||||||||||||
Investments purchased | — | 5,578,938 | 6,370,868 | 2,181,430 | ||||||||||||
Fund shares redeemed | — | 60,407 | 134,004 | 2,503 | ||||||||||||
Accrued Liabilities: | ||||||||||||||||
Investment advisory fees, net | 26,145 | 44,601 | 61,223 | 23,541 | ||||||||||||
Service fees | 5,451 | 143 | 40 | 306 | ||||||||||||
Administration, accounting and transfer agent fees | 9,818 | 16,092 | 16,512 | 7,802 | ||||||||||||
Business management fees | 5,451 | 7,433 | 7,653 | 3,828 | ||||||||||||
Trustee fees | 840 | 1,942 | 1,852 | 1,137 | ||||||||||||
Distribution fees | 2,212 | — | — | — | ||||||||||||
Professional fees | 10,641 | 11,515 | 11,716 | 10,744 | ||||||||||||
Custodian fees | 728 | 841 | 2,026 | 844 | ||||||||||||
Other liabilities | 3,531 | 3,978 | 1,808 | 1,310 | ||||||||||||
Total Liabilities | 64,817 | 5,900,720 | 6,607,702 | 2,602,589 | ||||||||||||
NET ASSETS | $ | 131,140,532 | $ | 179,193,551 | $ | 181,922,953 | $ | 92,699,906 | ||||||||
COMPONENTS OF NET ASSETS | ||||||||||||||||
Paid-in capital | $ | 134,994,841 | $ | 182,992,915 | $ | 188,814,042 | $ | 93,724,956 | ||||||||
Total distributable earnings (loss) | (3,854,309 | ) | (3,799,364 | ) | (6,891,089 | ) | (1,025,050 | ) | ||||||||
NET ASSETS | $ | 131,140,532 | $ | 179,193,551 | $ | 181,922,953 | $ | 92,699,906 | ||||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||||||
Institutional Shares: | ||||||||||||||||
Net assets | $ | — | $ | 175,796,497 | $ | 180,860,473 | $ | 84,322,254 | ||||||||
Shares outstanding (unlimited shares authorized) | — | 18,130,634 | 19,317,894 | 8,735,721 | ||||||||||||
Net asset value per share | $ | — | $ | 9.70 | $ | 9.36 | $ | 9.65 | ||||||||
Investor Shares: | ||||||||||||||||
Net assets | $ | 127,628,984 | $ | 3,397,054 | $ | 1,062,480 | $ | 8,377,652 | ||||||||
Shares outstanding (unlimited shares authorized) | 12,335,467 | 350,314 | 113,496 | 868,130 | ||||||||||||
Net asset value per share | $ | 10.35 | $ | 9.70 | $ | 9.36 | $ | 9.65 | ||||||||
Advisor Shares: | ||||||||||||||||
Net assets | $ | 3,511,548 | $ | — | $ | — | $ | — | ||||||||
Shares outstanding (unlimited shares authorized) | 346,776 | — | — | — | ||||||||||||
Net asset value per share | $ | 10.13 | $ | — | $ | — | $ | — |
The accompanying notes are an integral part of these financial statements.
93
Statements of Assets and Liabilities
December 31, 2018 (Unaudited)
BROWN | ||||||||||||||||
ADVISORY – | ||||||||||||||||
BROWN | BROWN | BROWN | WMC | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | STRATEGIC | |||||||||||||
MARYLAND | TAX-EXEMPT | MORTGAGE | EUROPEAN | |||||||||||||
BOND | BOND | SECURITIES | EQUITY | |||||||||||||
FUND | FUND | FUND | FUND | |||||||||||||
ASSETS | ||||||||||||||||
Investments: | ||||||||||||||||
Total investments, at cost | $ | 177,168,574 | $ | 615,133,184 | $ | 325,611,485 | $ | 596,384,033 | ||||||||
Net unrealized appreciation (depreciation) | (228,666 | ) | 911,019 | (591,510 | ) | 21,563,866 | ||||||||||
Total investments, at market value | 176,939,908 | 616,044,203 | 325,019,975 | 617,947,899 | ||||||||||||
Foreign currency (Cost of $—, $—, $— and $5, respectively.) | — | — | — | 5 | ||||||||||||
Cash deposit at broker – futures contracts (Note 6) | — | — | 23,880 | — | ||||||||||||
Gross unrealized appreciation – futures contracts (Note 6) | — | — | 1,654,377 | — | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold | — | — | 8,011,126 | 1,964,178 | ||||||||||||
Fund shares sold | 97,501 | 6,887,880 | 3,555,000 | 4,193,090 | ||||||||||||
Interest and dividends | 2,522,382 | 4,822,450 | 1,312,575 | 3,394,777 | ||||||||||||
Prepaid expenses and other assets | 8,095 | 46,248 | 40,081 | 48,592 | ||||||||||||
Total Assets | 179,567,886 | 627,800,781 | 339,617,014 | 627,548,541 | ||||||||||||
LIABILITIES | ||||||||||||||||
Gross unrealized depreciation – futures contracts (Note 6) | — | — | 947,505 | — | ||||||||||||
Payables: | ||||||||||||||||
Investments purchased | — | — | 42,971,911 | 150,223 | ||||||||||||
Fund shares redeemed | 54,567 | 600,164 | — | 11,456,749 | ||||||||||||
Distribution to shareholders | 275,467 | 1,293,994 | — | — | ||||||||||||
Interest expense due on line of credit | 133 | — | — | 1,048 | ||||||||||||
Accrued Liabilities: | ||||||||||||||||
Investment advisory fees | 45,969 | 150,500 | 73,554 | 531,430 | ||||||||||||
Service fees | 7,662 | 1,724 | 12 | 2,774 | ||||||||||||
Administration, accounting and transfer agent fees | 14,539 | 39,093 | 40,757 | 58,436 | ||||||||||||
Business management fees | 7,662 | 25,084 | 12,259 | 29,524 | ||||||||||||
Trustee fees | 936 | 6,822 | 3,438 | 7,618 | ||||||||||||
Distribution fees | — | — | — | 5,885 | ||||||||||||
Professional fees | 11,064 | 10,538 | 12,313 | 14,903 | ||||||||||||
Custodian fees | 920 | 2,875 | 3,070 | 45,915 | ||||||||||||
Other liabilities | 1,913 | 3,290 | 7,874 | 153,694 | ||||||||||||
Total Liabilities | 420,832 | 2,134,084 | 44,072,693 | 12,458,199 | ||||||||||||
NET ASSETS | $ | 179,147,054 | $ | 625,666,697 | $ | 295,544,321 | $ | 615,090,342 | ||||||||
COMPONENTS OF NET ASSETS | ||||||||||||||||
Paid-in capital | $ | 180,746,463 | $ | 630,389,376 | $ | 311,589,575 | $ | 607,666,162 | ||||||||
Total distributable earnings (loss) | (1,599,409 | ) | (4,722,679 | ) | (16,045,254 | ) | 7,424,180 | |||||||||
NET ASSETS | $ | 179,147,054 | $ | 625,666,697 | $ | 295,544,321 | $ | 615,090,342 | ||||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||||||
Institutional Shares: | ||||||||||||||||
Net assets | $ | — | $ | 586,312,501 | $ | 295,276,814 | $ | 594,176,612 | ||||||||
Shares outstanding (unlimited shares authorized) | — | 59,371,758 | 30,578,180 | 61,890,934 | ||||||||||||
Net asset value per share | $ | — | $ | 9.88 | $ | 9.66 | $ | 9.60 | ||||||||
Investor Shares: | ||||||||||||||||
Net assets | $ | 179,147,054 | $ | 39,354,196 | $ | 267,507 | $ | 13,130,301 | ||||||||
Shares outstanding (unlimited shares authorized) | 17,095,035 | 3,985,281 | 27,684 | 1,369,624 | ||||||||||||
Net asset value per share | $ | 10.48 | $ | 9.87 | $ | 9.66 | $ | 9.59 | ||||||||
Advisor Shares: | ||||||||||||||||
Net assets | $ | — | $ | — | $ | — | $ | 7,783,429 | ||||||||
Shares outstanding (unlimited shares authorized) | — | — | — | 817,735 | ||||||||||||
Net asset value per share | $ | — | $ | — | $ | — | $ | 9.52 |
The accompanying notes are an integral part of these financial statements.
94
Statements of Assets and Liabilities
December 31, 2018 (Unaudited)
BROWN | BROWN | BROWN | ||||||||||
ADVISORY – | ADVISORY – | ADVISORY – | ||||||||||
WMC | SOMERSET | BEUTEL | ||||||||||
JAPAN ALPHA | EMERGING | GOODMAN | ||||||||||
OPPORTUNITIES | MARKETS | LARGE-CAP | ||||||||||
FUND | FUND | VALUE FUND | ||||||||||
ASSETS | ||||||||||||
Investments: | ||||||||||||
Total investments, at cost | $ | 254,888,556 | $ | 192,812,450 | $ | 206,468,949 | ||||||
Net unrealized appreciation (depreciation) | 4,874,729 | 22,609,366 | (10,683,453 | ) | ||||||||
Total investments, at market value | 259,763,285 | 215,421,816 | 195,785,496 | |||||||||
Cash | — | — | 36,379 | |||||||||
Foreign currency (Cost of $5,983, $3,301,338 and $—, respectively.) | 5,983 | 3,307,675 | — | |||||||||
Cash deposit at broker – futures contracts (Note 6) | 686,169 | — | — | |||||||||
Gross unrealized appreciation – futures contracts (Note 6) | 238,800 | — | — | |||||||||
Gross unrealized appreciation – forward foreign currency contracts (Note 7) | 234,096 | — | — | |||||||||
Receivables: | ||||||||||||
Investments sold | 21,596,483 | 6,722,739 | 8,860,879 | |||||||||
Fund shares sold | 1,049 | 208,450 | 4,472,545 | |||||||||
Interest and dividends | 599,078 | 1,207,075 | 279,193 | |||||||||
Prepaid expenses and other assets | 58,891 | 70,448 | 37,878 | |||||||||
Total Assets | 283,183,834 | 226,938,203 | 209,472,370 | |||||||||
LIABILITIES | ||||||||||||
Gross unrealized depreciation – futures contracts (Note 6) | — | — | — | |||||||||
Gross unrealized depreciation – forward foreign currency contracts (Note 7) | — | — | — | |||||||||
Variation margin due to broker (Note 6) | 4,462 | — | — | |||||||||
Payables: | ||||||||||||
Investments purchased | 1,957,341 | — | 21,252,533 | |||||||||
Fund shares redeemed | 3,459,722 | 1,522,696 | 573,035 | |||||||||
Principal due on line of credit | 2,168,000 | 12,023,000 | — | |||||||||
Interest expense due on line of credit | 432 | 7,048 | 5,080 | |||||||||
Accrued Liabilities: | ||||||||||||
Investment advisory fees | 315,118 | 188,449 | 79,212 | |||||||||
Service fees | 254 | 3,661 | — | |||||||||
Administration, accounting and transfer agent fees | 36,693 | 17,643 | 11,356 | |||||||||
Business management fees | 15,756 | 10,469 | 8,801 | |||||||||
Trustee fees | 5,142 | 3,068 | 2,265 | |||||||||
Distribution fees | 174 | 97 | — | |||||||||
Professional fees | 12,288 | 12,523 | 11,693 | |||||||||
Custodian fees | 34,858 | 103,023 | 2,672 | |||||||||
Other liabilities | 25,003 | 1,870 | 4,897 | |||||||||
Total Liabilities | 8,035,243 | 13,893,547 | 21,951,544 | |||||||||
NET ASSETS | $ | 275,148,591 | $ | 213,044,656 | $ | 187,520,826 | ||||||
COMPONENTS OF NET ASSETS | ||||||||||||
Paid-in capital | $ | 344,528,806 | $ | 239,034,241 | $ | 206,372,968 | ||||||
Total distributable earnings (loss) | (69,380,215 | ) | (25,989,585 | ) | (18,852,142 | ) | ||||||
NET ASSETS | $ | 275,148,591 | $ | 213,044,656 | $ | 187,520,826 | ||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||
Institutional Shares: | ||||||||||||
Net assets | $ | 273,416,839 | $ | 186,025,896 | $ | 187,520,826 | ||||||
Shares outstanding (unlimited shares authorized) | 43,644,791 | 21,637,380 | 20,767,812 | |||||||||
Net asset value per share | $ | 6.26 | $ | 8.60 | $ | 9.03 | ||||||
Investor Shares: | ||||||||||||
Net assets | $ | 1,533,779 | $ | 26,866,181 | $ | — | ||||||
Shares outstanding (unlimited shares authorized) | 246,548 | 3,128,083 | — | |||||||||
Net asset value per share | $ | 6.22 | $ | 8.59 | $ | — | ||||||
Advisor Shares: | ||||||||||||
Net assets | $ | 197,973 | $ | 152,579 | $ | — | ||||||
Shares outstanding (unlimited shares authorized) | 32,240 | 17,669 | — | |||||||||
Net asset value per share | $ | 6.14 | $ | 8.64 | $ | — |
The accompanying notes are an integral part of these financial statements.
95
Statements of Operations
For the Six Months Ended December 31, 2018 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | ADVISORY | |||||||||||||
GROWTH | FLEXIBLE | EQUITY | SUSTAINABLE | |||||||||||||
EQUITY | EQUITY | INCOME | GROWTH | |||||||||||||
FUND | FUND | FUND | FUND | |||||||||||||
INVESTMENT INCOME | ||||||||||||||||
Dividend income | $ | 4,556,946 | $ | 3,041,401 | $ | 1,275,088 | $ | 2,838,042 | ||||||||
Less: foreign taxes withheld | (29,936 | ) | (25,813 | ) | (10,175 | ) | (34,914 | ) | ||||||||
Interest Income | 485,169 | 59,120 | 35,174 | 191,531 | ||||||||||||
Total investment income | 5,012,179 | 3,074,708 | 1,300,087 | 2,994,659 | ||||||||||||
EXPENSES | ||||||||||||||||
Investment advisory fees | 6,021,202 | 1,026,569 | 287,888 | 2,253,779 | ||||||||||||
Service fees – Investor Shares (Note 3) | 1,304,231 | 242,373 | 50,240 | 89,954 | ||||||||||||
Business management fees | 513,011 | 115,718 | 23,991 | 187,815 | ||||||||||||
Administration, accounting and transfer agent fees | 343,941 | 77,909 | 17,029 | 125,992 | ||||||||||||
Professional fees | 83,843 | 25,762 | 13,808 | 36,488 | ||||||||||||
Miscellaneous expenses | 76,878 | 20,901 | 9,191 | 37,746 | ||||||||||||
Trustee fees | 58,951 | 13,105 | 2,698 | 22,596 | ||||||||||||
Custody fees | 31,062 | 8,079 | 2,942 | 13,045 | ||||||||||||
Registration fees | 26,926 | 17,094 | 19,769 | 39,507 | ||||||||||||
Insurance fees | 13,913 | 3,130 | 694 | 4,413 | ||||||||||||
Distribution fees – Advisor Shares (Note 3) | 7,775 | 7,113 | 1,301 | 272,832 | ||||||||||||
Service fees – Advisor Shares (Note 3) | 4,665 | 4,268 | 781 | 163,699 | ||||||||||||
Total Expenses | 8,486,398 | 1,562,021 | 430,332 | 3,247,866 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | (3,474,219 | ) | 1,512,687 | 869,755 | (253,207 | ) | ||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||
Net realized gain (loss) on investments | 115,726,362 | 9,638,533 | 4,098,322 | 12,644,648 | ||||||||||||
Net change in unrealized appreciation (depreciation) on investments | (263,182,085 | ) | (52,687,211 | ) | (9,561,396 | ) | (55,376,519 | ) | ||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (147,455,723 | ) | (43,048,678 | ) | (5,463,074 | ) | (42,731,871 | ) | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | (150,929,942 | ) | $ | (41,535,991 | ) | $ | (4,593,319 | ) | $ | (42,985,078 | ) |
The accompanying notes are an integral part of these financial statements.
96
Statements of Operations
For the Six Months Ended December 31, 2018 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | ADVISORY | |||||||||||||
MID-CAP | SMALL-CAP | SMALL-CAP | GLOBAL | |||||||||||||
GROWTH | GROWTH | FUNDAMENTAL | LEADERS | |||||||||||||
FUND | FUND | VALUE FUND | FUND | |||||||||||||
INVESTMENT INCOME | ||||||||||||||||
Dividend income | $ | 93,659 | $ | 2,633,196 | $ | 11,999,685 | $ | 446,040 | ||||||||
Less: foreign taxes withheld | (959 | ) | (22,146 | ) | — | (11,876 | ) | |||||||||
Interest Income | 5,527 | 552,568 | 467,233 | 51,338 | ||||||||||||
Total investment income | 98,227 | 3,163,618 | 12,466,918 | 485,502 | ||||||||||||
EXPENSES | ||||||||||||||||
Investment advisory fees | 83,067 | 3,942,536 | 5,373,504 | 386,568 | ||||||||||||
Registration fees | 14,704 | 38,166 | 16,696 | 17,833 | ||||||||||||
Professional fees | 10,797 | 43,746 | 50,644 | 14,793 | ||||||||||||
Service fees – Investor Shares (Note 3) | 9,572 | 358,854 | 521,334 | 59,890 | ||||||||||||
Miscellaneous expenses | 9,161 | 73,311 | 68,354 | 16,693 | ||||||||||||
Custody fees | 8,703 | 15,835 | 21,218 | 60,291 | ||||||||||||
Business management fees | 6,390 | 231,914 | 316,089 | 29,736 | ||||||||||||
Administration, accounting and transfer agent fees | 6,042 | 158,182 | 206,492 | 23,590 | ||||||||||||
Trustee fees | 567 | 29,836 | 36,810 | 3,697 | ||||||||||||
Interest expense on line of credit | 220 | — | — | — | ||||||||||||
Insurance fees | 61 | 5,894 | 8,867 | 492 | ||||||||||||
Distribution fees – Advisor Shares (Note 3) | — | 22,923 | 29,072 | — | ||||||||||||
Service fees – Advisor Shares (Note 3) | — | 13,754 | 17,443 | — | ||||||||||||
Total Expenses | 149,284 | 4,934,951 | 6,666,523 | 613,583 | ||||||||||||
Expenses waived by adviser – expense cap (Note 3) | (50,255 | ) | — | — | (126,203 | ) | ||||||||||
Net Expenses | 99,029 | 4,934,951 | 6,666,523 | 487,380 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | (802 | ) | (1,771,333 | ) | 5,800,395 | (1,878 | ) | |||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||
Net realized gain (loss) on investments | (33,115 | ) | 42,130,181 | 74,631,841 | (1,725,006 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) on investments | (3,150,944 | ) | (158,271,972 | ) | (271,611,260 | ) | (10,606,834 | ) | ||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (3,184,059 | ) | (116,141,791 | ) | (196,979,419 | ) | (12,331,840 | ) | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | (3,184,861 | ) | $ | (117,913,124 | ) | $ | (191,179,024 | ) | $ | (12,333,718 | ) | ||||
The accompanying notes are an integral part of these financial statements.
97
Statements of Operations
For the Six Months Ended December 31, 2018 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | ADVISORY | |||||||||||||
INTERMEDIATE | TOTAL | STRATEGIC | SUSTAINABLE | |||||||||||||
INCOME | RETURN | BOND | BOND | |||||||||||||
FUND | FUND | FUND | FUND | |||||||||||||
INVESTMENT INCOME | ||||||||||||||||
Dividend income – unaffiliated | $ | — | $ | 17,025 | $ | 43,894 | $ | — | ||||||||
Dividend income – affiliated (Note 3) | 366,850 | — | — | — | ||||||||||||
Interest Income | 1,594,844 | 2,782,361 | 3,251,552 | 1,339,711 | ||||||||||||
Total investment income | 1,961,694 | 2,799,386 | 3,295,446 | 1,339,711 | ||||||||||||
EXPENSES | ||||||||||||||||
Investment advisory fees | 192,544 | 226,789 | 328,660 | 113,587 | ||||||||||||
Business management fees | 32,091 | 37,798 | 41,082 | 18,931 | ||||||||||||
Service fees – Investor Shares (Note 3) | 31,189 | 786 | 125 | 7,511 | ||||||||||||
Administration, accounting and transfer agent fees | 29,898 | 45,498 | 60,787 | 21,903 | ||||||||||||
Registration fees | 17,048 | 18,272 | 18,610 | 15,101 | ||||||||||||
Professional fees | 14,538 | 16,065 | 16,732 | 12,908 | ||||||||||||
Miscellaneous expenses | 11,042 | 12,401 | 9,824 | 7,909 | ||||||||||||
Distribution fees – Advisor Shares (Note 3) | 4,509 | — | — | — | ||||||||||||
Trustee fees | 3,541 | 4,407 | 4,658 | 2,409 | ||||||||||||
Custodian fees | 2,845 | 4,814 | 5,175 | 2,360 | ||||||||||||
Insurance fees | 903 | 813 | 994 | 266 | ||||||||||||
Service fees – Advisor Shares (Note 3) | 901 | — | — | — | ||||||||||||
Total Expenses | 341,049 | 367,643 | 486,647 | 202,885 | ||||||||||||
Expenses waived by adviser – investments in affiliates (Note 3) | (36,511 | ) | — | — | — | |||||||||||
Previously waived expenses recovered by adviser (Note 3) | — | — | — | 12,869 | ||||||||||||
Net Expenses | 304,538 | 367,643 | 486,647 | 215,754 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | 1,657,156 | 2,431,743 | 2,808,799 | 1,123,957 | ||||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||
Investments – unaffiliated | (1,264,339 | ) | (833,052 | ) | (259,449 | ) | (405,389 | ) | ||||||||
Investments – affiliated (Note 3) | (58,395 | ) | — | — | — | |||||||||||
Futures contracts (Note 6) | — | (620,146 | ) | (38,160 | ) | (112,311 | ) | |||||||||
Net realized gain (loss) | (1,322,734 | ) | (1,453,198 | ) | (297,609 | ) | (517,700 | ) | ||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments – unaffiliated | 1,104,600 | (331,242 | ) | (2,396,774 | ) | 298,357 | ||||||||||
Investments – affiliated (Note 3) | 95,045 | — | — | — | ||||||||||||
Futures contracts (Note 6) | — | 993,954 | 70,497 | 63,306 | ||||||||||||
Net change in unrealized appreciation (depreciation) | 1,199,645 | 662,712 | (2,326,277 | ) | 361,663 | |||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (123,089 | ) | (790,486 | ) | (2,623,886 | ) | (156,037 | ) | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | 1,534,067 | $ | 1,641,257 | $ | 184,913 | $ | 967,920 |
The accompanying notes are an integral part of these financial statements.
98
Statements of Operations
For the Six Months Ended December 31, 2018 (Unaudited)
BROWN | ||||||||||||||||
ADVISORY – | ||||||||||||||||
BROWN | BROWN | BROWN | WMC | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | STRATEGIC | |||||||||||||
MARYLAND | TAX-EXEMPT | MORTGAGE | EUROPEAN | |||||||||||||
BOND | BOND | SECURITIES | EQUITY | |||||||||||||
FUND | FUND | FUND | FUND | |||||||||||||
INVESTMENT INCOME | ||||||||||||||||
Dividend income | $ | — | $ | — | $ | 43,880 | $ | 3,713,498 | ||||||||
Less: foreign taxes withheld | — | — | — | (394,080 | ) | |||||||||||
Interest Income | 2,819,529 | 9,927,733 | 4,308,113 | 145,325 | ||||||||||||
Total investment income | 2,819,529 | 9,927,733 | 4,351,993 | 3,464,743 | ||||||||||||
EXPENSES | ||||||||||||||||
Investment advisory fees | 273,605 | 788,594 | 444,377 | 3,838,207 | ||||||||||||
Service fees – Investor Shares (Note 3) | 45,601 | 57,859 | 78 | 11,369 | ||||||||||||
Business management fees | 45,601 | 131,432 | 74,063 | 213,234 | ||||||||||||
Administration, accounting and transfer agent fees | 40,464 | 103,134 | 97,157 | 157,911 | ||||||||||||
Professional fees | 15,891 | 26,101 | 20,193 | 36,142 | ||||||||||||
Miscellaneous expenses | 11,108 | 19,315 | 17,022 | 155,083 | ||||||||||||
Trustee fees | 4,263 | 16,054 | 8,979 | 22,574 | ||||||||||||
Registration fees | 4,124 | 24,023 | 17,397 | 27,912 | ||||||||||||
Custodian fees | 2,813 | 8,438 | 10,228 | 178,659 | ||||||||||||
Insurance fees | 1,268 | 2,582 | 2,103 | 9,142 | ||||||||||||
Interest expense on line of credit | 133 | — | — | 17,540 | ||||||||||||
Service fees – Advisor Shares (Note 3) | — | — | — | 8,283 | ||||||||||||
Distribution fees – Advisor Shares (Note 3) | — | — | — | 13,806 | ||||||||||||
Total Expenses | 444,871 | 1,177,532 | 691,597 | 4,689,862 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | 2,374,658 | 8,750,201 | 3,660,396 | (1,225,119 | ) | |||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||
Investments | (754,754 | ) | (1,857,354 | ) | (2,412,739 | ) | 26,426,266 | |||||||||
Futures contracts (Note 6) | — | — | (200,603 | ) | — | |||||||||||
Net realized gain (loss) | (754,754 | ) | (1,857,354 | ) | (2,613,342 | ) | 26,426,266 | |||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments | 321,921 | 1,109,181 | 3,307,238 | (140,611,619 | ) | |||||||||||
Futures contracts (Note 6) | — | — | 71,116 | — | ||||||||||||
Net change in unrealized appreciation (depreciation) | 321,921 | 1,109,181 | 3,378,354 | (140,611,619 | ) | |||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (432,833 | ) | (748,173 | ) | 765,012 | (114,185,353 | ) | |||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | 1,941,825 | $ | 8,002,028 | $ | 4,425,408 | $ | (115,410,472 | ) |
The accompanying notes are an integral part of these financial statements.
99
Statements of Operations
For the Six Months Ended December 31, 2018 (Unaudited)
BROWN | BROWN | BROWN | ||||||||||
ADVISORY – | ADVISORY – | ADVISORY – | ||||||||||
WMC | SOMERSET | BEUTEL | ||||||||||
JAPAN ALPHA | EMERGING | GOODMAN | ||||||||||
OPPORTUNITIES | MARKETS | LARGE-CAP | ||||||||||
FUND | FUND | VALUE FUND | ||||||||||
INVESTMENT INCOME | ||||||||||||
Dividend income | $ | 6,446,984 | $ | 5,323,096 | $ | 2,217,991 | ||||||
Less: foreign taxes withheld | (644,698 | ) | (854,567 | ) | — | |||||||
Interest Income | 305,331 | 72,962 | 53,773 | |||||||||
Total investment income | 6,107,617 | 4,541,491 | 2,271,764 | |||||||||
EXPENSES | ||||||||||||
Investment advisory fees | 3,457,840 | 1,808,518 | 414,183 | |||||||||
Business management fees | 172,892 | 100,473 | 46,020 | |||||||||
Miscellaneous expenses | 168,352 | 18,682 | 7,978 | |||||||||
Custodian fees | 157,651 | 391,599 | 8,401 | |||||||||
Administration, accounting and transfer agent fees | 136,590 | 71,762 | 30,910 | |||||||||
Registration fees | 68,586 | 33,223 | 14,994 | |||||||||
Professional fees | 36,357 | 23,044 | 17,363 | |||||||||
Trustee fees | 22,358 | 11,719 | 5,394 | |||||||||
Insurance fees | 10,442 | 4,274 | 810 | |||||||||
Service fees – Investor Shares (Note 3) | 1,649 | 25,534 | — | |||||||||
Interest expense on line of credit | 432 | 28,275 | 5,080 | |||||||||
Distribution fees – Advisor Shares (Note 3) | 382 | 203 | — | |||||||||
Service fees – Advisor Shares (Note 3) | 229 | 122 | — | |||||||||
Total Expenses | 4,233,760 | 2,517,428 | 551,133 | |||||||||
NET INVESTMENT INCOME (LOSS) | 1,873,857 | 2,024,063 | 1,720,631 | |||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||
Net realized gain (loss) on: | ||||||||||||
Investments | (26,257,694 | ) | 2,941,063 | (5,863,557 | ) | |||||||
Futures contracts (Note 6) | 751,006 | — | — | |||||||||
Forward foreign currency contracts (Note 7) | (1,221,617 | ) | — | — | ||||||||
Net realized gain (loss) | (26,728,305 | ) | 2,941,063 | (5,863,557 | ) | |||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||
Investments | (73,938,020 | ) | (56,559,673 | ) | (6,776,000 | ) | ||||||
Futures contracts (Note 6) | 1,286,878 | — | — | |||||||||
Forward foreign currency contracts (Note 7) | 618,277 | — | — | |||||||||
Net change in unrealized appreciation (depreciation) | (72,032,865 | ) | (56,559,673 | ) | (6,776,000 | ) | ||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (98,761,170 | ) | (53,618,610 | ) | (12,639,557 | ) | ||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | (96,887,313 | ) | $ | (51,594,547 | ) | $ | (10,918,926 | ) |
The accompanying notes are an integral part of these financial statements.
100
Statements of Changes in Net Assets
BROWN ADVISORY | BROWN ADVISORY | |||||||||||||||
GROWTH EQUITY FUND | FLEXIBLE EQUITY FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | (Unaudited) | 2018 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | (3,474,219 | ) | $ | (7,980,352 | ) | $ | 1,512,687 | $ | 1,623,165 | ||||||
Net realized gain (loss) | 115,726,362 | 189,010,520 | 9,638,533 | 11,789,560 | ||||||||||||
Net change in unrealized appreciation (depreciation) | (263,182,085 | ) | 301,958,936 | (52,687,211 | ) | 63,268,737 | ||||||||||
Increase (Decrease) in Net Assets from Operations | (150,929,942 | ) | 482,989,104 | (41,535,991 | ) | 76,681,462 | ||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | (31,938,093 | ) | (23,141,509 | ) | (4,982,976 | ) | (643,925 | ) | ||||||||
Investor Shares | (170,284,290 | ) | (120,503,157 | ) | (11,627,698 | ) | (1,422,429 | ) | ||||||||
Advisor Shares | (633,523 | ) | (469,496 | ) | (152,574 | ) | (9,268 | ) | ||||||||
Total Distributions from earnings (Note 9) | (202,855,906 | ) | (144,114,162 | ) | (16,763,248 | ) | (2,075,622 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 67,159,014 | 55,826,305 | 7,471,943 | 24,771,706 | ||||||||||||
Investor Shares | 129,154,294 | 242,524,550 | 20,004,885 | 24,311,427 | ||||||||||||
Advisor Shares | 831,827 | 1,099,275 | 103,418 | 746,297 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 25,119,009 | 18,263,760 | 4,128,381 | 294,182 | ||||||||||||
Investor Shares | 158,805,932 | 113,405,269 | 6,006,030 | 278,371 | ||||||||||||
Advisor Shares | 570,681 | 435,592 | 131,607 | 8,519 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (50,080,446 | ) | (112,225,735 | ) | (10,149,404 | ) | (14,207,288 | ) | ||||||||
Investor Shares | (275,142,009 | ) | (352,089,999 | ) | (16,494,063 | ) | (73,507,427 | ) | ||||||||
Advisor Shares | (1,233,737 | ) | (1,740,283 | ) | (2,105,046 | ) | (1,163,850 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | 38 | 311 | — | 3 | ||||||||||||
Investor Shares | 1,755 | 1,329 | — | 82 | ||||||||||||
Advisor Shares | 5 | 96 | — | 95 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 55,186,363 | (34,499,530 | ) | 9,097,751 | (38,467,883 | ) | ||||||||||
Increase (Decrease) in Net Assets | (298,599,485 | ) | 304,375,412 | (49,201,488 | ) | 36,137,957 | ||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 2,070,829,198 | 1,766,453,786 | 453,771,371 | 417,633,414 | ||||||||||||
End of period | $ | 1,772,229,713 | $ | 2,070,829,198 | $ | 404,569,883 | $ | 453,771,371 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 2,856,304 | 2,520,724 | 339,868 | 1,176,283 | ||||||||||||
Investor Shares | 5,520,081 | 11,032,342 | 938,298 | 1,192,054 | ||||||||||||
Advisor Shares | 36,872 | 50,292 | 4,666 | 34,532 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 1,280,929 | 865,991 | 213,265 | 14,123 | ||||||||||||
Investor Shares | 8,190,094 | 5,423,494 | 309,491 | 13,383 | ||||||||||||
Advisor Shares | 31,185 | 21,867 | 6,780 | 409 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (2,188,948 | ) | (5,087,579 | ) | (482,102 | ) | (683,544 | ) | ||||||||
Investor Shares | (11,755,655 | ) | (16,142,426 | ) | (774,000 | ) | (3,549,882 | ) | ||||||||
Advisor Shares | (55,550 | ) | (84,091 | ) | (95,943 | ) | (56,568 | ) | ||||||||
Increase (Decrease) in shares outstanding | 3,915,312 | (1,399,386 | ) | 460,323 | (1,859,210 | ) |
The accompanying notes are an integral part of these financial statements.
101
Statements of Changes in Net Assets
BROWN ADVISORY | BROWN ADVISORY | |||||||||||||||
EQUITY INCOME FUND | SUSTAINABLE GROWTH FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | (Unaudited) | 2018 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 869,755 | $ | 1,770,507 | $ | (253,207 | ) | $ | (605,520 | ) | ||||||
Net realized gain (loss) | 4,098,322 | 10,709,083 | 12,644,648 | 29,170,107 | ||||||||||||
Net change in unrealized appreciation (depreciation) | (9,561,396 | ) | (2,043,861 | ) | (55,376,519 | ) | 78,562,772 | |||||||||
Increase (Decrease) in Net Assets from Operations | (4,593,319 | ) | 10,435,729 | (42,985,078 | ) | 107,127,359 | ||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | (3,193,391 | ) | (1,429,024 | ) | (14,400,651 | ) | (4,421,769 | ) | ||||||||
Investor Shares | (7,602,287 | ) | (3,809,361 | ) | (4,531,789 | ) | (802,354 | ) | ||||||||
Advisor Shares | (116,184 | ) | (102,967 | ) | (7,216,074 | ) | (3,143,772 | ) | ||||||||
Total Distributions from earnings (Note 9) | (10,911,862 | ) | (5,341,352 | ) | (26,148,514 | ) | (8,367,895 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 340,523 | 3,800,667 | 102,882,766 | 122,220,935 | ||||||||||||
Investor Shares | 843,715 | 3,156,796 | 51,908,702 | 79,916,263 | ||||||||||||
Advisor Shares | 37,359 | 11,604 | 14,632,910 | 32,423,797 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 2,989,783 | 1,168,517 | 10,630,757 | 3,046,077 | ||||||||||||
Investor Shares | 3,402,230 | 1,369,084 | 4,159,852 | 658,241 | ||||||||||||
Advisor Shares | 105,165 | 98,704 | 6,736,941 | 2,961,244 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (3,144,988 | ) | (7,864,535 | ) | (22,923,119 | ) | (29,645,324 | ) | ||||||||
Investor Shares | (3,604,638 | ) | (23,608,528 | ) | (16,818,003 | ) | (25,813,176 | ) | ||||||||
Advisor Shares | (99,635 | ) | (1,561,239 | ) | (21,625,442 | ) | (29,567,360 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | — | 29 | 379 | ||||||||||||
Investor Shares | — | 20 | 1,425 | 848 | ||||||||||||
Advisor Shares | 1 | — | 52 | 759 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 869,515 | (23,428,910 | ) | 129,586,870 | 156,202,683 | |||||||||||
Increase (Decrease) in Net Assets | (14,635,666 | ) | (18,334,533 | ) | 60,453,278 | 254,962,147 | ||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 95,564,551 | 113,899,084 | 685,105,333 | 430,143,186 | ||||||||||||
End of period | $ | 80,928,885 | $ | 95,564,551 | $ | 745,558,611 | $ | 685,105,333 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 22,776 | 264,042 | 4,525,352 | 5,634,586 | ||||||||||||
Investor Shares | 64,812 | 218,695 | 2,273,268 | 3,662,250 | ||||||||||||
Advisor Shares | 3,095 | 800 | 635,121 | 1,527,066 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 242,198 | 80,076 | 505,024 | 144,982 | ||||||||||||
Investor Shares | 277,277 | 93,297 | 199,801 | 31,616 | ||||||||||||
Advisor Shares | 8,545 | 6,755 | 329,274 | 144,240 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (232,448 | ) | (546,258 | ) | (1,006,762 | ) | (1,402,766 | ) | ||||||||
Investor Shares | (252,731 | ) | (1,629,814 | ) | (747,898 | ) | (1,177,511 | ) | ||||||||
Advisor Shares | (6,699 | ) | (108,542 | ) | (965,382 | ) | (1,445,494 | ) | ||||||||
Increase (Decrease) in shares outstanding | 126,825 | (1,620,949 | ) | 5,747,798 | 7,118,969 |
The accompanying notes are an integral part of these financial statements.
102
Statements of Changes in Net Assets
BROWN ADVISORY | BROWN ADVISORY | |||||||||||||||
MID-CAP GROWTH FUND | SMALL-CAP GROWTH FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | * | (Unaudited) | 2018 | ||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | (802 | ) | $ | (12,997 | ) | $ | (1,771,333 | ) | $ | (3,827,917 | ) | ||||
Net realized gain (loss) | (33,115 | ) | 87,029 | 42,130,181 | 16,272,365 | |||||||||||
Net change in unrealized appreciation (depreciation) | (3,150,944 | ) | 1,457,376 | (158,271,972 | ) | 110,459,513 | ||||||||||
Increase (Decrease) in Net Assets from Operations | (3,184,861 | ) | 1,531,408 | (117,913,124 | ) | 122,903,961 | ||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | (251,515 | ) | — | (18,857,505 | ) | (6,328,426 | ) | |||||||||
Investor Shares | (28,594 | ) | — | (20,274,986 | ) | (6,317,788 | ) | |||||||||
Advisor Shares | — | — | (736,847 | ) | (287,248 | ) | ||||||||||
Total Distributions from earnings (Note 9) | (280,109 | ) | — | (39,869,338 | ) | (12,933,462 | ) | |||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 32,646,491 | — | 59,360,781 | 251,107,663 | ||||||||||||
Investor Shares | 4,840,160 | 20,644,989 | 45,107,338 | 141,526,587 | ||||||||||||
Advisor Shares | — | — | 2,139,208 | 3,086,119 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 175,744 | — | 17,134,301 | 5,632,861 | ||||||||||||
Investor Shares | 6,330 | — | 13,467,350 | 3,636,951 | ||||||||||||
Advisor Shares | — | — | 472,665 | 199,271 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (4,194,821 | ) | — | (61,598,521 | ) | (48,046,237 | ) | |||||||||
Investor Shares | (24,846,048 | ) | (798,980 | ) | (52,615,810 | ) | (60,450,109 | ) | ||||||||
Advisor Shares | — | — | (3,255,460 | ) | (20,641,592 | ) | ||||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | — | 331 | 9,528 | ||||||||||||
Investor Shares | — | 77 | 6 | 316 | ||||||||||||
Advisor Shares | — | — | 297 | 120 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 8,627,856 | 19,846,086 | 20,212,486 | 276,061,478 | ||||||||||||
Increase (Decrease) in Net Assets | 5,162,886 | 21,377,494 | (137,569,976 | ) | 386,031,977 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 21,377,494 | — | 919,684,074 | 533,652,097 | ||||||||||||
End of period | $ | 26,540,380 | $ | 21,377,494 | $ | 782,114,098 | $ | 919,684,074 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 2,814,504 | — | 1,500,331 | 6,841,265 | ||||||||||||
Investor Shares | 409,251 | 1,955,128 | 2,315,330 | 7,365,046 | ||||||||||||
Advisor Shares | — | — | 110,900 | 171,520 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 17,435 | — | 504,201 | 150,581 | ||||||||||||
Investor Shares | 629 | — | 789,396 | 194,006 | ||||||||||||
Advisor Shares | — | — | 29,009 | 11,119 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (397,902 | ) | — | (1,611,787 | ) | (1,259,137 | ) | |||||||||
Investor Shares | (2,071,276 | ) | (72,793 | ) | (2,750,454 | ) | (3,155,860 | ) | ||||||||
Advisor Shares | — | — | (172,393 | ) | (1,183,625 | ) | ||||||||||
Increase (Decrease) in shares outstanding | 772,641 | 1,882,335 | 714,533 | 9,134,915 |
* | Commenced operations October 2, 2017. The information presented is for the period from October 2, 2017 to June 30, 2018. |
The accompanying notes are an integral part of these financial statements.
103
Statements of Changes in Net Assets
BROWN ADVISORY SMALL-CAP | BROWN ADVISORY | |||||||||||||||
FUNDAMENTAL VALUE FUND | GLOBAL LEADERS FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | (Unaudited) | 2018 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 5,800,395 | $ | 5,201,123 | $ | (1,878 | ) | $ | 334,758 | |||||||
Net realized gain (loss) | 74,631,841 | 90,515,972 | (1,725,006 | ) | 870,610 | |||||||||||
Net change in unrealized appreciation (depreciation) | (271,611,260 | ) | 48,605,436 | (10,606,834 | ) | 7,505,020 | ||||||||||
Increase (Decrease) in Net Assets from Operations | (191,179,024 | ) | 144,322,531 | (12,333,718 | ) | 8,710,388 | ||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | (61,245,393 | ) | (16,278,424 | ) | (320,277 | ) | — | |||||||||
Investor Shares | (69,753,988 | ) | (35,639,963 | ) | (26,825 | ) | (43,629 | ) | ||||||||
Advisor Shares | (2,165,335 | ) | (920,082 | ) | — | — | ||||||||||
Total Distributions from earnings (Note 9) | (133,164,716 | ) | (52,838,469 | ) | (347,102 | ) | (43,629 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 237,495,030 | 91,821,131 | 145,565,326 | — | ||||||||||||
Investor Shares | 25,246,495 | 129,081,238 | 53,083,279 | 41,258,390 | ||||||||||||
Advisor Shares | 1,344,281 | 4,185,998 | — | — | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 41,165,697 | 11,905,214 | 87,785 | — | ||||||||||||
Investor Shares | 44,121,355 | 21,281,919 | 14,683 | 19,205 | ||||||||||||
Advisor Shares | 2,090,046 | 890,719 | — | — | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (96,226,843 | ) | (61,182,890 | ) | (11,198,362 | ) | — | |||||||||
Investor Shares | (271,684,381 | ) | (172,896,660 | ) | (121,482,036 | ) | (3,185,671 | ) | ||||||||
Advisor Shares | (5,977,223 | ) | (6,814,344 | ) | — | — | ||||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | 1,203 | 83 | — | — | ||||||||||||
Investor Shares | 6 | 836 | 2 | — | ||||||||||||
Advisor Shares | 158 | 34 | — | — | ||||||||||||
Increase (Decrease) from Capital Share Transactions | (22,424,176 | ) | 18,273,278 | 66,070,677 | 38,091,924 | |||||||||||
Increase (Decrease) in Net Assets | (346,767,916 | ) | 109,757,340 | 53,389,857 | 46,758,683 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 1,310,085,851 | 1,200,328,511 | 86,112,456 | 39,353,773 | ||||||||||||
End of period | $ | 963,317,935 | $ | 1,310,085,851 | $ | 139,502,313 | $ | 86,112,456 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 8,214,133 | 3,252,145 | 10,977,432 | — | ||||||||||||
Investor Shares | 963,262 | 4,590,806 | 3,778,083 | 3,053,558 | ||||||||||||
Advisor Shares | 48,174 | 147,739 | — | — | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 1,856,445 | 416,146 | 7,172 | — | ||||||||||||
Investor Shares | 1,989,311 | 744,919 | 1,200 | 1,474 | ||||||||||||
Advisor Shares | 94,809 | 31,366 | — | — | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (3,702,313 | ) | (2,158,295 | ) | (887,122 | ) | — | |||||||||
Investor Shares | (9,652,829 | ) | (6,120,611 | ) | (9,102,494 | ) | (246,142 | ) | ||||||||
Advisor Shares | (220,333 | ) | (242,164 | ) | — | — | ||||||||||
Increase (Decrease) in shares outstanding | (409,341 | ) | 662,051 | 4,774,271 | 2,808,890 |
The accompanying notes are an integral part of these financial statements.
104
Statements of Changes in Net Assets
BROWN ADVISORY | BROWN ADVISORY | |||||||||||||||
INTERMEDIATE INCOME FUND | TOTAL RETURN FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | (Unaudited) | 2018 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 1,657,156 | $ | 2,931,790 | $ | 2,431,743 | $ | 3,248,105 | ||||||||
Net realized gain (loss) | (1,322,734 | ) | (512,406 | ) | (1,453,198 | ) | (1,077,288 | ) | ||||||||
Net change in unrealized appreciation (depreciation) | 1,199,645 | (2,578,104 | ) | 662,712 | (1,564,891 | ) | ||||||||||
Increase (Decrease) in Net Assets from Operations | 1,534,067 | (158,720 | ) | 1,641,257 | 605,926 | |||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | — | — | (2,420,955 | ) | (3,247,038 | ) | ||||||||||
Investor Shares | (1,498,506 | ) | (2,930,957 | ) | (50,491 | ) | (80,086 | ) | ||||||||
Advisor Shares | (39,564 | ) | (80,947 | ) | — | — | ||||||||||
Total Distributions from earnings (Note 9) | (1,538,070 | ) | (3,011,904 | ) | (2,471,446 | ) | (3,327,124 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | — | — | 61,773,973 | 42,259,249 | ||||||||||||
Investor Shares | 19,626,266 | 27,591,617 | 911,074 | 865,839 | ||||||||||||
Advisor Shares | 847 | 42,334 | — | — | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | — | — | 754,054 | 914,158 | ||||||||||||
Investor Shares | 434,946 | 776,065 | 34,355 | 50,718 | ||||||||||||
Advisor Shares | 21,045 | 44,524 | — | — | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | — | — | (7,306,217 | ) | (26,826,272 | ) | ||||||||||
Investor Shares | (17,490,720 | ) | (32,172,093 | ) | (143,259 | ) | (896,218 | ) | ||||||||
Advisor Shares | (290,531 | ) | (307,597 | ) | — | — | ||||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | — | — | — | ||||||||||||
Investor Shares | — | — | — | — | ||||||||||||
Advisor Shares | — | — | — | — | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 2,301,853 | (4,025,150 | ) | 56,023,980 | 16,367,474 | |||||||||||
Increase (Decrease) in Net Assets | 2,297,850 | (7,195,774 | ) | 55,193,791 | 13,646,276 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 128,842,682 | 136,038,456 | 123,999,760 | 110,353,484 | ||||||||||||
End of period | $ | 131,140,532 | $ | 128,842,682 | $ | 179,193,551 | $ | 123,999,760 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | — | — | 6,391,074 | 4,246,452 | ||||||||||||
Investor Shares | 1,905,957 | 2,634,707 | 93,735 | 86,723 | ||||||||||||
Advisor Shares | 84 | 4,147 | — | — | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | — | — | 77,935 | 92,154 | ||||||||||||
Investor Shares | 42,231 | 74,019 | 3,547 | 5,106 | ||||||||||||
Advisor Shares | 2,088 | 4,334 | — | — | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | — | — | (754,944 | ) | (2,694,044 | ) | ||||||||||
Investor Shares | (1,698,165 | ) | (3,073,377 | ) | (14,848 | ) | (90,812 | ) | ||||||||
Advisor Shares | (28,762 | ) | (29,898 | ) | — | — | ||||||||||
Increase (Decrease) in shares outstanding | 223,433 | (386,068 | ) | 5,796,499 | 1,645,579 |
The accompanying notes are an integral part of these financial statements.
105
Statements of Changes in Net Assets
BROWN ADVISORY | BROWN ADVISORY | |||||||||||||||
STRATEGIC BOND FUND | SUSTAINABLE BOND FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | (Unaudited) | 2018 | * | ||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 2,808,799 | $ | 3,738,451 | $ | 1,123,957 | $ | 612,584 | ||||||||
Net realized gain (loss) | (297,609 | ) | 126,593 | (517,700 | ) | (95,567 | ) | |||||||||
Net change in unrealized appreciation (depreciation) | (2,326,277 | ) | (1,633,800 | ) | 361,663 | (758,985 | ) | |||||||||
Increase (Decrease) in Net Assets from Operations | 184,913 | 2,231,244 | 967,920 | (241,968 | ) | |||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | (2,962,175 | ) | (3,754,542 | ) | (803,316 | ) | — | |||||||||
Investor Shares | (9,549 | ) | (5,508 | ) | (340,623 | ) | (607,063 | ) | ||||||||
Total Distributions from earnings (Note 9) | (2,971,724 | ) | (3,760,050 | ) | (1,143,939 | ) | (607,063 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 55,513,322 | 75,949,692 | 88,417,567 | — | ||||||||||||
Investor Shares | 1,227,496 | 3,026 | 12,886,655 | 58,724,426 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 596,898 | 715,397 | 97,034 | — | ||||||||||||
Investor Shares | 9,491 | 5,481 | 107,249 | 87,382 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (13,623,653 | ) | (48,641,279 | ) | (4,566,085 | ) | — | |||||||||
Investor Shares | (377,577 | ) | (40,830 | ) | (58,357,980 | ) | (3,671,592 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | 150 | 1,150 | — | — | ||||||||||||
Investor Shares | 40 | — | — | 300 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 43,346,167 | 27,992,637 | 38,584,440 | 55,140,516 | ||||||||||||
Increase (Decrease) in Net Assets | 40,559,356 | 26,463,831 | 38,408,421 | 54,291,485 | ||||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 141,363,597 | 114,899,766 | 54,291,485 | — | ||||||||||||
End of period | $ | 181,922,953 | $ | 141,363,597 | $ | 92,699,906 | $ | 54,291,485 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 5,845,692 | 7,918,222 | 9,201,855 | — | ||||||||||||
Investor Shares | 129,585 | 316 | 1,331,993 | 5,962,310 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 63,102 | 74,680 | 10,123 | — | ||||||||||||
Investor Shares | 1,007 | 572 | 11,147 | 8,943 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (1,438,047 | ) | (5,081,400 | ) | (476,257 | ) | — | |||||||||
Investor Shares | (39,591 | ) | (4,245 | ) | (6,070,218 | ) | (376,045 | ) | ||||||||
Increase (Decrease) in shares outstanding | 4,561,748 | 2,908,145 | 4,008,643 | 5,595,208 |
* | Commenced operations August 7, 2017. Information presented is for the period from August 7, 2017 to June 30, 2018. |
The accompanying notes are an integral part of these financial statements.
106
Statements of Changes in Net Assets
BROWN ADVISORY | BROWN ADVISORY | |||||||||||||||
MARYLAND BOND FUND | TAX-EXEMPT BOND FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | (Unaudited) | 2018 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 2,374,658 | $ | 4,460,151 | $ | 8,750,201 | $ | 10,089,671 | ||||||||
Net realized gain (loss) | (754,754 | ) | (208,324 | ) | (1,857,354 | ) | (1,355,285 | ) | ||||||||
Net change in unrealized appreciation (depreciation) | 321,921 | (1,885,045 | ) | 1,109,181 | 18,081 | |||||||||||
Increase (Decrease) in Net Assets from Operations | 1,941,825 | 2,366,782 | 8,002,028 | 8,752,467 | ||||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | — | — | (5,102,334 | ) | — | |||||||||||
Investor Shares | (2,374,551 | ) | (4,460,151 | ) | (3,656,715 | ) | (10,089,715 | ) | ||||||||
Total Distributions from earnings (Note 9) | (2,374,551 | ) | (4,460,151 | ) | (8,759,049 | ) | (10,089,715 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | — | — | 649,111,106 | — | ||||||||||||
Investor Shares | 23,602,615 | 35,879,457 | 77,039,300 | 246,120,438 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | — | — | 939,410 | — | ||||||||||||
Investor Shares | 712,230 | 1,054,555 | 811,104 | 2,167,523 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | — | — | (65,465,266 | ) | — | |||||||||||
Investor Shares | (25,965,437 | ) | (35,128,638 | ) | (475,918,616 | ) | (64,647,222 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | — | 350 | — | ||||||||||||
Investor Shares | — | — | 300 | 398 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | (1,650,592 | ) | 1,805,374 | 186,517,688 | 183,641,137 | |||||||||||
Increase (Decrease) in Net Assets | (2,083,318 | ) | (287,995 | ) | 185,760,667 | 182,303,889 | ||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 181,230,372 | 181,518,367 | 439,906,030 | 257,602,141 | ||||||||||||
End of period | $ | 179,147,054 | $ | 181,230,372 | $ | 625,666,697 | $ | 439,906,030 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | — | — | 65,948,569 | — | ||||||||||||
Investor Shares | 2,261,708 | 3,393,000 | 7,789,685 | 24,817,937 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | — | — | 95,440 | — | ||||||||||||
Investor Shares | 68,190 | 99,934 | 82,181 | 218,428 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | — | — | (6,672,251 | ) | — | |||||||||||
Investor Shares | (2,488,407 | ) | (3,327,151 | ) | (48,326,774 | ) | (6,517,455 | ) | ||||||||
Increase (Decrease) in shares outstanding | (158,509 | ) | 165,783 | 18,916,850 | 18,518,910 |
The accompanying notes are an integral part of these financial statements.
107
Statements of Changes in Net Assets
BROWN ADVISORY – | ||||||||||||||||
BROWN ADVISORY | WMC STRATEGIC | |||||||||||||||
MORTGAGE SECURITIES FUND | EUROPEAN EQUITY FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | (Unaudited) | 2018 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 3,660,396 | $ | 6,217,564 | $ | (1,225,119 | ) | $ | 13,288,431 | |||||||
Net realized gain (loss) | (2,613,342 | ) | (4,400,444 | ) | 26,426,266 | 89,857,660 | ||||||||||
Net change in unrealized appreciation (depreciation) | 3,378,354 | (1,464,547 | ) | (140,611,619 | ) | (45,676,197 | ) | |||||||||
Increase (Decrease) in Net Assets from Operations | 4,425,408 | 352,573 | (115,410,472 | ) | 57,469,894 | |||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | (4,442,943 | ) | (7,958,014 | ) | (74,718,358 | ) | (11,440,046 | ) | ||||||||
Investor Shares | (4,508 | ) | (9,960 | ) | (1,440,449 | ) | (101,939 | ) | ||||||||
Advisor Shares | — | — | (877,353 | ) | (150,711 | ) | ||||||||||
Total Distributions from earnings (Note 9) | (4,447,451 | ) | (7,967,974 | ) | (77,036,160 | ) | (11,692,696 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 26,858,000 | 39,751,492 | 59,199,326 | 339,470,651 | ||||||||||||
Investor Shares | 63,317 | 216,903 | 5,198,756 | 11,622,830 | ||||||||||||
Advisor Shares | — | — | 432,476 | 16,766,170 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 612,008 | 1,241,725 | 54,307,923 | 7,878,218 | ||||||||||||
Investor Shares | 4,508 | 9,914 | 1,336,888 | 90,587 | ||||||||||||
Advisor Shares | — | — | 832,723 | 144,260 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (32,813,997 | ) | (75,445,993 | ) | (260,715,923 | ) | (641,379,961 | ) | ||||||||
Investor Shares | (120,945 | ) | (638,352 | ) | (4,428,693 | ) | (4,408,236 | ) | ||||||||
Advisor Shares | — | — | (4,524,422 | ) | (14,664,337 | ) | ||||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | — | 50 | 1,843 | ||||||||||||
Investor Shares | — | — | — | 55 | ||||||||||||
Advisor Shares | — | — | — | 5 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | (5,397,109 | ) | (34,864,311 | ) | (148,360,896 | ) | (284,477,915 | ) | ||||||||
Increase (Decrease) in Net Assets | (5,419,152 | ) | (42,479,712 | ) | (340,807,528 | ) | (238,700,717 | ) | ||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 300,963,473 | 343,443,185 | 955,897,870 | 1,194,598,587 | ||||||||||||
End of period | $ | 295,544,321 | $ | 300,963,473 | $ | 615,090,342 | $ | 955,897,870 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 2,799,694 | 4,037,680 | 5,203,033 | 26,506,741 | ||||||||||||
Investor Shares | 6,595 | 22,023 | 444,377 | 908,527 | ||||||||||||
Advisor Shares | — | — | 36,782 | 1,340,426 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 63,794 | 126,980 | 5,614,751 | 614,047 | ||||||||||||
Investor Shares | 470 | 1,011 | 138,631 | 7,066 | ||||||||||||
Advisor Shares | — | — | 87,135 | 11,332 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (3,429,588 | ) | (7,741,968 | ) | (23,626,578 | ) | (50,042,495 | ) | ||||||||
Investor Shares | (12,584 | ) | (64,569 | ) | (395,867 | ) | (344,483 | ) | ||||||||
Advisor Shares | — | — | (388,254 | ) | (1,166,163 | ) | ||||||||||
Increase (Decrease) in shares outstanding | (571,619 | ) | (3,618,843 | ) | (12,885,990 | ) | (22,165,002 | ) |
The accompanying notes are an integral part of these financial statements.
108
Statements of Changes in Net Assets
BROWN ADVISORY – | BROWN ADVISORY – | |||||||||||||||
WMC JAPAN ALPHA | SOMERSET EMERGING | |||||||||||||||
OPPORTUNITIES FUND | MARKETS FUND | |||||||||||||||
Six Months Ended | Fiscal | Six Months Ended | Fiscal | |||||||||||||
December 31, | Year Ended | December 31, | Year Ended | |||||||||||||
2018 | June 30, | 2018 | June 30, | |||||||||||||
(Unaudited) | 2018 | (Unaudited) | 2018 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 1,873,857 | $ | 9,903,665 | $ | 2,024,063 | $ | 10,115,149 | ||||||||
Net realized gain (loss) | (26,728,305 | ) | 120,194,165 | 2,941,063 | (780,021 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) | (72,032,865 | ) | (108,585,352 | ) | (56,559,673 | ) | (8,868,079 | ) | ||||||||
Increase (Decrease) in Net Assets from Operations | (96,887,313 | ) | 21,512,478 | (51,594,547 | ) | 467,049 | ||||||||||
DISTRIBUTIONS FROM EARNINGS | ||||||||||||||||
Institutional Shares | (117,538,389 | ) | (89,654,329 | ) | (8,210,572 | ) | (4,634,486 | ) | ||||||||
Investor Shares | (563,805 | ) | (275,411 | ) | (1,023,238 | ) | (1,520,480 | ) | ||||||||
Advisor Shares | (79,772 | ) | (29,957 | ) | (5,109 | ) | (1,572 | ) | ||||||||
Total Distributions from earnings (Note 9) | (118,181,966 | ) | (89,959,697 | ) | (9,238,919 | ) | (6,156,538 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 11,515,886 | 695,456,636 | 22,135,137 | 268,323,043 | ||||||||||||
Investor Shares | 69,901 | 1,836,749 | 6,134,405 | 12,555,778 | ||||||||||||
Advisor Shares | 120,059 | 9,524 | 2,008 | 15,769 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 116,522,820 | 24,849,668 | 2,455,975 | 1,577,593 | ||||||||||||
Investor Shares | 452,242 | 224,178 | 889,506 | 1,425,207 | ||||||||||||
Advisor Shares | 78,535 | 29,197 | 5,109 | 1,571 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (1,128,187,833 | ) | (150,105,105 | ) | (296,490,548 | ) | (139,753,965 | ) | ||||||||
Investor Shares | (528,772 | ) | (2,238,481 | ) | (13,065,017 | ) | (177,784,349 | ) | ||||||||
Advisor Shares | (158,054 | ) | (137,976 | ) | (2,358 | ) | (104,083 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | 201 | 60 | 365 | 87 | ||||||||||||
Investor Shares | — | 40 | — | — | ||||||||||||
Advisor Shares | — | 1 | — | — | ||||||||||||
Increase (Decrease) from Capital Share Transactions | (1,000,115,015 | ) | 569,924,491 | (277,935,418 | ) | (33,743,349 | ) | |||||||||
Increase (Decrease) in Net Assets | (1,215,184,294 | ) | 501,477,272 | (338,768,884 | ) | (39,432,838 | ) | |||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 1,490,332,885 | 988,855,613 | 551,813,540 | 591,246,378 | ||||||||||||
End of period | $ | 275,148,591 | $ | 1,490,332,885 | $ | 213,044,656 | $ | 551,813,540 | ||||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 1,111,378 | 59,396,066 | 2,364,521 | 23,671,478 | ||||||||||||
Investor Shares | 7,297 | 154,623 | 656,993 | 1,152,310 | ||||||||||||
Advisor Shares | 11,290 | 827 | 216 | 1,423 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 17,138,897 | 2,187,471 | 291,338 | 142,382 | ||||||||||||
Investor Shares | 67,337 | 19,821 | 105,642 | 128,745 | ||||||||||||
Advisor Shares | 11,801 | 2,602 | 603 | 141 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (113,527,515 | ) | (13,150,538 | ) | (32,072,525 | ) | (12,830,641 | ) | ||||||||
Investor Shares | (59,148 | ) | (202,674 | ) | (1,433,481 | ) | (15,549,972 | ) | ||||||||
Advisor Shares | (18,157 | ) | (12,053 | ) | (252 | ) | (9,249 | ) | ||||||||
Increase (Decrease) in shares outstanding | (95,256,820 | ) | 48,396,145 | (30,086,945 | ) | (3,293,383 | ) |
The accompanying notes are an integral part of these financial statements.
109
Statements of Changes in Net Assets
BROWN ADVISORY – | ||||||||
BEUTEL GOODMAN | ||||||||
LARGE-CAP VALUE FUND | ||||||||
Six Months Ended | Fiscal | |||||||
December 31, | Year Ended | |||||||
2018 | June 30, | |||||||
(Unaudited) | 2018 | * | ||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | 1,720,631 | $ | 664,783 | ||||
Net realized gain (loss) | (5,863,557 | ) | (418,544 | ) | ||||
Net change in unrealized appreciation (depreciation) | (6,776,000 | ) | (3,907,453 | ) | ||||
Increase (Decrease) in Net Assets from Operations | (10,918,926 | ) | (3,661,214 | ) | ||||
DISTRIBUTIONS FROM EARNINGS | ||||||||
Institutional Shares | (4,272,002 | ) | — | |||||
Total Distributions from earnings (Note 9) | (4,272,002 | ) | — | |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Sale of shares: | ||||||||
Institutional Shares | 92,753,385 | 158,358,440 | ||||||
Reinvestment of distributions: | ||||||||
Institutional Shares | 1,717,764 | — | ||||||
Redemption of shares: | ||||||||
Institutional Shares | (42,764,138 | ) | (3,694,661 | ) | ||||
Redemption fees: | ||||||||
Institutional Shares | 782 | 1,396 | ||||||
Increase (Decrease) from Capital Share Transactions | 51,707,793 | 154,665,175 | ||||||
Increase (Decrease) in Net Assets | 36,516,865 | 151,003,961 | ||||||
NET ASSETS | ||||||||
Beginning of period | 151,003,961 | — | ||||||
End of period | $ | 187,520,826 | $ | 151,003,961 | ||||
SHARE TRANSACTIONS | ||||||||
Sale of shares: | ||||||||
Institutional Shares | 9,505,227 | 16,152,897 | ||||||
Reinvestment of distributions: | ||||||||
Institutional Shares | 185,951 | — | ||||||
Redemption of shares: | ||||||||
Institutional Shares | (4,689,754 | ) | (386,509 | ) | ||||
Increase (Decrease) in shares outstanding | 5,001,424 | 15,766,388 |
* | Commenced operations February 13, 2018. Information presented is for the period from February 13, 2018 to June 30, 2018. |
The accompanying notes are an integral part of these financial statements.
110
Financial Highlights
From Investment | Distributions to | Ratios to Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations(a) | Shareholders From | Net Assets(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a Share | Realized | Net | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Net Asset | Net | & | Asset | Assets at | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Throughout | Value, | Investment | Unrealized | Net | Net | Value, | End of | Investment | Gross | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Each Fiscal Period: | Beginning | Income | Gains | Investment | Realized | End of | Total | Period | Income | Net | Expenses | Turnover | |||||||||||||||||||||||||||||||||||||||||||||||
Beginning | Ending | of Period | (Loss) | (Losses) | Total | Income | Gains | Total | Period | Return(c) | (000’s | ) | (Loss) | Expenses | (d) | Rate(c) | |||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY GROWTH EQUITY FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | $ | 23.91 | (0.03 | ) | (1.81 | ) | (1.84 | ) | — | (2.45 | ) | (2.45 | ) | $ | 19.62 | (7.68 | )% | $ | 275,667 | (0.21 | )% | 0.70 | % | 0.70 | % | 11 | % | |||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 20.03 | (0.06 | ) | 5.62 | 5.56 | — | (1.68 | ) | (1.68 | ) | 23.91 | 28.89 | 289,434 | (0.29 | ) | 0.71 | 0.71 | 25 | ||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 19.16 | (0.03 | ) | 2.47 | 2.44 | — | (1.57 | ) | (1.57 | ) | 20.03 | 13.91 | 276,592 | (0.16 | ) | 0.72 | 0.72 | 40 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 20.33 | (0.02 | ) | 0.13 | 0.11 | — | (1.28 | ) | (1.28 | ) | 19.16 | 0.49 | 253,640 | (0.12 | ) | 0.72 | 0.72 | 24 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 19.10 | 0.02 | 1.82 | 1.84 | — | (0.61 | ) | (0.61 | ) | 20.33 | 9.73 | 259,098 | 0.09 | 0.72 | 0.72 | 24 | ||||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 16.22 | — | 2.99 | 2.99 | — | (0.11 | ) | (0.11 | ) | 19.10 | 18.46 | 233,627 | 0.03 | 0.74 | 0.74 | 25 | ||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 23.69 | (0.04 | ) | (1.81 | ) | (1.85 | ) | — | (2.45 | ) | (2.45 | ) | 19.39 | (7.80 | ) | 1,491,285 | (0.36 | ) | 0.85 | 0.85 | 11 | |||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 19.89 | (0.10 | ) | 5.58 | 5.48 | — | (1.68 | ) | (1.68 | ) | 23.69 | 28.69 | 1,775,180 | (0.44 | ) | 0.86 | 0.86 | 25 | ||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 19.06 | (0.06 | ) | 2.46 | 2.40 | — | (1.57 | ) | (1.57 | ) | 19.89 | 13.77 | 1,484,383 | (0.31 | ) | 0.87 | 0.87 | 40 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 20.26 | (0.05 | ) | 0.13 | 0.08 | — | (1.28 | ) | (1.28 | ) | 19.06 | 0.34 | 1,916,472 | (0.27 | ) | 0.87 | 0.87 | 24 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 19.07 | (0.01 | ) | 1.81 | 1.80 | — | (0.61 | ) | (0.61 | ) | 20.26 | 9.54 | 2,143,325 | (0.06 | ) | 0.87 | 0.87 | 24 | ||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 16.21 | (0.02 | ) | 2.99 | 2.97 | — | (0.11 | ) | (0.11 | ) | 19.07 | 18.35 | 2,497,036 | (0.12 | ) | 0.89 | 0.89 | 25 | ||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 22.53 | (0.07 | ) | (1.71 | ) | (1.78 | ) | — | (2.45 | ) | (2.45 | ) | 18.30 | (7.89 | ) | 5,277 | (0.61 | ) | 1.10 | 1.10 | 11 | |||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 19.04 | (0.14 | ) | 5.31 | 5.17 | — | (1.68 | ) | (1.68 | ) | 22.53 | 28.32 | 6,215 | (0.69 | ) | 1.11 | 1.11 | 25 | ||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 18.35 | (0.10 | ) | 2.36 | 2.26 | — | (1.57 | ) | (1.57 | ) | 19.04 | 13.53 | 5,479 | (0.56 | ) | 1.12 | 1.12 | 40 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 19.60 | (0.10 | ) | 0.13 | 0.03 | — | (1.28 | ) | (1.28 | ) | 18.35 | 0.09 | 33,304 | (0.52 | ) | 1.12 | 1.12 | 24 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 18.51 | (0.06 | ) | 1.76 | 1.70 | — | (0.61 | ) | (0.61 | ) | 19.60 | 9.28 | 44,587 | (0.31 | ) | 1.12 | 1.12 | 24 | ||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 15.78 | (0.07 | ) | 2.91 | 2.84 | — | (0.11 | ) | (0.11 | ) | 18.51 | 18.02 | 48,632 | (0.37 | ) | 1.14 | 1.14 | 25 | ||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY FLEXIBLE EQUITY FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 21.94 | 0.09 | (2.08 | ) | (1.99 | ) | (0.08 | ) | (0.74 | ) | (0.82 | ) | 19.13 | (9.07 | ) | 115,729 | 0.76 | 0.57 | 0.57 | 9 | ||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 18.53 | 0.10 | 3.43 | 3.53 | (0.12 | ) | — | (0.12 | ) | 21.94 | 19.07 | 131,218 | 0.48 | 0.72 | 0.72 | 15 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 15.15 | 0.11 | 3.37 | 3.48 | (0.10 | ) | — | (0.10 | ) | 18.53 | 23.05 | 101,431 | 0.61 | 0.73 | 0.73 | 15 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 15.92 | 0.11 | (0.77 | ) | (0.66 | ) | (0.11 | ) | — | (0.11 | ) | 15.15 | (4.16 | ) | 24,012 | 0.71 | 0.73 | 0.73 | 15 | |||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 14.81 | 0.12 | 1.08 | 1.20 | (0.09 | ) | — | (0.09 | ) | 15.92 | 8.09 | 4,240 | 0.76 | 0.76 | 0.76 | 7 | ||||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 12.28 | 0.09 | 2.49 | 2.58 | (0.05 | ) | — | (0.05 | ) | 14.81 | 21.06 | 3,126 | 0.66 | 0.82 | 0.81 | 15 | ||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 21.90 | 0.07 | (2.07 | ) | (2.00 | ) | (0.05 | ) | (0.74 | ) | (0.79 | ) | 19.11 | (9.15 | ) | 284,827 | 0.61 | 0.72 | 0.72 | 9 | ||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 18.50 | 0.07 | 3.42 | 3.49 | (0.09 | ) | — | (0.09 | ) | 21.90 | 18.88 | 316,109 | 0.33 | 0.87 | 0.87 | 15 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 15.12 | 0.08 | 3.37 | 3.45 | (0.07 | ) | — | (0.07 | ) | 18.50 | 22.90 | 310,360 | 0.46 | 0.88 | 0.88 | 15 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 15.89 | 0.08 | (0.76 | ) | (0.68 | ) | (0.09 | ) | — | (0.09 | ) | 15.12 | (4.30 | ) | 306,456 | 0.56 | 0.88 | 0.88 | 15 | |||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 14.79 | 0.10 | 1.07 | 1.17 | (0.07 | ) | — | (0.07 | ) | 15.89 | 7.92 | 268,569 | 0.61 | 0.91 | 0.91 | 7 | ||||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 12.28 | 0.07 | 2.48 | 2.55 | (0.04 | ) | — | (0.04 | ) | 14.79 | 20.78 | 162,615 | 0.51 | 0.97 | 0.96 | 15 | ||||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 21.91 | 0.04 | (2.07 | ) | (2.03 | ) | — | (0.74 | ) | (0.74 | ) | 19.14 | (9.30 | ) | 4,013 | 0.36 | 0.97 | 0.97 | 9 | |||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 18.50 | 0.02 | 3.42 | 3.44 | (0.03 | ) | — | (0.03 | ) | 21.91 | 18.61 | 6,445 | 0.08 | 1.12 | 1.12 | 15 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 15.12 | 0.04 | 3.37 | 3.41 | (0.03 | ) | — | (0.03 | ) | 18.50 | 22.56 | 5,842 | 0.21 | 1.13 | 1.13 | 15 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 15.88 | 0.05 | (0.77 | ) | (0.72 | ) | (0.04 | ) | — | (0.04 | ) | 15.12 | (4.56 | ) | 7,168 | 0.31 | 1.13 | 1.13 | 15 | |||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 14.77 | 0.06 | 1.07 | 1.13 | (0.02 | ) | — | (0.02 | ) | 15.88 | 7.68 | 11,540 | 0.36 | 1.16 | 1.16 | 7 | ||||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 12.28 | 0.04 | 2.48 | 2.52 | (0.03 | ) | — | (0.03 | ) | 14.77 | 20.52 | 14,831 | 0.26 | 1.22 | 1.21 | 15 |
The accompanying notes are an integral part of these financial statements.
111
Financial Highlights
From Investment | Distributions to | Ratios to Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations(a) | Shareholders From | Net Assets(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a Share | Realized | Net | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Net Asset | Net | & | Asset | Assets at | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Throughout | Value, | Investment | Unrealized | Net | Net | Value, | End of | Investment | Gross | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Each Fiscal Period: | Beginning | Income | Gains | Investment | Realized | End of | Total | Period | Income | Net | Expenses | Turnover | |||||||||||||||||||||||||||||||||||||||||||||||
Beginning | Ending | of Period | (Loss) | (Losses) | Total | Income | Gains | Total | Period | Return(c) | (000’s | ) | (Loss) | Expenses | (d) | Rate(c) | |||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY EQUITY INCOME FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | $ | 14.41 | 0.14 | (0.87 | ) | (0.73 | ) | (0.13 | ) | (1.58 | ) | (1.71 | ) | $ | 11.97 | (5.27 | )% | $ | 23,636 | 1.92 | % | 0.79 | % | 0.79 | % | 9 | % | |||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 13.80 | 0.24 | 1.07 | 1.31 | (0.25 | ) | (0.45 | ) | (0.70 | ) | 14.41 | 9.51 | 27,975 | 1.70 | 0.77 | 0.77 | 14 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 12.87 | 0.26 | 1.41 | 1.67 | (0.26 | ) | (0.48 | ) | (0.74 | ) | 13.80 | 13.36 | 29,587 | 1.94 | 0.77 | 0.77 | 7 | |||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 13.14 | 0.28 | (0.13 | ) | 0.15 | (0.29 | ) | (0.13 | ) | (0.42 | ) | 12.87 | 1.31 | 13,840 | 2.24 | 0.75 | 0.75 | 17 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 13.70 | 0.29 | 0.08 | 0.37 | (0.30 | ) | (0.63 | ) | (0.93 | ) | 13.14 | 2.60 | 18,134 | 2.16 | 0.75 | 0.75 | 18 | |||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 12.16 | 0.29 | 1.99 | 2.28 | (0.29 | ) | (0.45 | ) | (0.74 | ) | 13.70 | 19.30 | 17,663 | 2.23 | 0.77 | 0.77 | 32 | |||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 14.40 | 0.13 | (0.86 | ) | (0.73 | ) | (0.12 | ) | (1.58 | ) | (1.70 | ) | 11.97 | (5.27 | ) | 56,338 | 1.77 | 0.94 | 0.94 | 9 | ||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 13.80 | 0.22 | 1.06 | 1.28 | (0.23 | ) | (0.45 | ) | (0.68 | ) | 14.40 | 9.27 | 66,512 | 1.55 | 0.92 | 0.92 | 14 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 12.86 | 0.24 | 1.42 | 1.66 | (0.24 | ) | (0.48 | ) | (0.72 | ) | 13.80 | 13.28 | 81,890 | 1.79 | 0.92 | 0.92 | 7 | |||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 13.13 | 0.26 | (0.13 | ) | 0.13 | (0.27 | ) | (0.13 | ) | (0.40 | ) | 12.86 | 1.15 | 112,116 | 2.09 | 0.90 | 0.90 | 17 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 13.69 | 0.27 | 0.08 | 0.35 | (0.28 | ) | (0.63 | ) | (0.91 | ) | 13.13 | 2.45 | 183,001 | 2.01 | 0.90 | 0.90 | 18 | |||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 12.16 | 0.27 | 1.98 | 2.25 | (0.27 | ) | (0.45 | ) | (0.72 | ) | 13.69 | 19.04 | 180,372 | 2.08 | 0.92 | 0.92 | 32 | |||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 14.40 | 0.11 | (0.87 | ) | (0.76 | ) | (0.10 | ) | (1.58 | ) | (1.68 | ) | 11.96 | (5.47 | ) | 954 | 1.52 | 1.19 | 1.19 | 9 | ||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 13.78 | 0.19 | 1.06 | 1.25 | (0.18 | ) | (0.45 | ) | (0.63 | ) | 14.40 | 9.04 | 1,077 | 1.30 | 1.17 | 1.17 | 14 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 12.84 | 0.20 | 1.43 | 1.63 | (0.21 | ) | (0.48 | ) | (0.69 | ) | 13.78 | 13.02 | 2,422 | 1.54 | 1.17 | 1.17 | 7 | |||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 13.11 | 0.23 | (0.13 | ) | 0.10 | (0.24 | ) | (0.13 | ) | (0.37 | ) | 12.84 | 0.90 | 2,980 | 1.84 | 1.15 | 1.15 | 17 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 13.67 | 0.24 | 0.07 | 0.31 | (0.24 | ) | (0.63 | ) | (0.87 | ) | 13.11 | 2.19 | 3,148 | 1.76 | 1.15 | 1.15 | 18 | |||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 12.14 | 0.24 | 1.98 | 2.22 | (0.24 | ) | (0.45 | ) | (0.69 | ) | 13.67 | 18.79 | 3,298 | 1.83 | 1.17 | 1.17 | 32 | |||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY SUSTAINABLE GROWTH FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 23.02 | 0.01 | (1.22 | ) | (1.21 | ) | — | (0.78 | ) | (0.78 | ) | 21.03 | (5.26 | ) | 422,253 | 0.07 | 0.72 | 0.72 | 15 | |||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 18.94 | 0.01 | 4.42 | 4.43 | — | (0.35 | ) | (0.35 | ) | 23.02 | 23.59 | 369,642 | 0.05 | 0.73 | 0.73 | 29 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 16.05 | (0.02 | ) | 3.03 | 3.01 | — | (0.12 | ) | (0.12 | ) | 18.94 | 18.83 | 221,177 | (0.10 | ) | 0.73 | 0.73 | 41 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 15.69 | (0.02 | ) | 1.13 | 1.11 | — | (0.75 | ) | (0.75 | ) | 16.05 | 7.17 | 122,008 | (0.11 | ) | 0.74 | 0.74 | 30 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 14.11 | (0.02 | ) | 1.91 | 1.89 | — | (0.31 | ) | (0.31 | ) | 15.69 | 13.50 | 67,789 | (0.11 | ) | 0.75 | 0.75 | 37 | ||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 11.64 | — | 2.61 | 2.61 | — | (0.14 | ) | (0.14 | ) | 14.11 | 22.51 | 30,374 | (0.01 | ) | 0.77 | 0.77 | 30 | |||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 22.79 | (0.01 | ) | (1.21 | ) | (1.22 | ) | — | (0.78 | ) | (0.78 | ) | 20.79 | (5.36 | ) | 129,119 | (0.08 | ) | 0.87 | 0.87 | 15 | |||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 18.78 | (0.02 | ) | 4.38 | 4.36 | — | (0.35 | ) | (0.35 | ) | 22.79 | 23.41 | 102,201 | (0.10 | ) | 0.88 | 0.88 | 29 | ||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 15.94 | (0.04 | ) | 3.00 | 2.96 | — | (0.12 | ) | (0.12 | ) | 18.78 | 18.65 | 36,954 | (0.25 | ) | 0.88 | 0.88 | 41 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 15.61 | (0.04 | ) | 1.12 | 1.08 | — | (0.75 | ) | (0.75 | ) | 15.94 | 7.01 | 25,676 | (0.26 | ) | 0.89 | 0.89 | 30 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 14.06 | (0.04 | ) | 1.90 | 1.86 | — | (0.31 | ) | (0.31 | ) | 15.61 | 13.34 | 11,206 | (0.26 | ) | 0.90 | 0.90 | 37 | ||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 11.62 | (0.02 | ) | 2.60 | 2.58 | — | (0.14 | ) | (0.14 | ) | 14.06 | 22.29 | 46,823 | (0.16 | ) | 0.92 | 0.92 | 30 | ||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 22.44 | (0.04 | ) | (1.18 | ) | (1.22 | ) | — | (0.78 | ) | (0.78 | ) | 20.44 | (5.44 | ) | 194,186 | (0.33 | ) | 1.12 | 1.12 | 15 | |||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 18.54 | (0.07 | ) | 4.32 | 4.25 | — | (0.35 | ) | (0.35 | ) | 22.44 | 23.12 | 213,262 | (0.35 | ) | 1.13 | 1.13 | 29 | ||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 15.78 | (0.08 | ) | 2.96 | 2.88 | — | (0.12 | ) | (0.12 | ) | 18.54 | 18.33 | 172,012 | (0.50 | ) | 1.13 | 1.13 | 41 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 15.50 | (0.08 | ) | 1.11 | 1.03 | — | (0.75 | ) | (0.75 | ) | 15.78 | 6.73 | 201,727 | (0.51 | ) | 1.14 | 1.14 | 30 | ||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 14.00 | (0.07 | ) | 1.88 | 1.81 | — | (0.31 | ) | (0.31 | ) | 15.50 | 13.03 | 137,410 | (0.51 | ) | 1.15 | 1.15 | 37 | ||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 11.60 | (0.05 | ) | 2.59 | 2.54 | — | (0.14 | ) | (0.14 | ) | 14.00 | 21.99 | 132,846 | (0.41 | ) | 1.17 | 1.17 | 30 |
The accompanying notes are an integral part of these financial statements.
112
Financial Highlights
From Investment | Distributions to | Ratios to Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations(a) | Shareholders From | Net Assets(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a Share | Realized | Net | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Net Asset | Net | & | Asset | Assets at | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||
Throughout | Value, | Investment | Unrealized | Net | Net | Value, | End of | Investment | Gross | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||
Each Fiscal Period: | Beginning | Income | Gains | Investment | Realized | End of | Total | Period | Income | Net | Expenses | Turnover | |||||||||||||||||||||||||||||||||||||||||||||
Beginning | Ending | of Period | (Loss) | (Losses) | Total | Income | Gains | Total | Period | Return(c) | (000’s | ) | (Loss) | Expenses | (d) | Rate(c) | |||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY MID-CAP GROWTH FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/02/18^ | 12/31/18 | $ | 11.42 | — | (1.31 | ) | (1.31 | ) | — | (0.11 | ) | (0.11 | ) | $ | 10.00 | (11.45 | )% | $ | 24,333 | 0.07 | % | 0.70 | % | 1.09 | % | 29 | % | ||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 11.36 | — | (1.26 | ) | (1.26 | ) | — | (0.11 | ) | (0.11 | ) | 9.99 | (11.07 | ) | 2,207 | (0.08 | ) | 0.85 | 1.24 | 29 | ||||||||||||||||||||||||||||||||||||
10/02/17^ | 06/30/18 | 10.00 | (0.01 | ) | 1.37 | 1.36 | — | — | — | 11.36 | 13.60 | 21,377 | (0.16 | ) | 0.85 | 1.58 | 29 | ||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY SMALL-CAP GROWTH FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 40.64 | (0.06 | ) | (5.08 | ) | (5.14 | ) | (0.18 | ) | (1.59 | ) | (1.77 | ) | 33.73 | (12.66 | ) | 365,559 | (0.30 | ) | 0.98 | 0.98 | 26 | ||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 35.15 | (0.16 | ) | 6.31 | 6.15 | (0.15 | ) | (0.51 | ) | (0.66 | ) | 40.64 | 17.64 | 424,449 | (0.42 | ) | 0.98 | 0.98 | 30 | |||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 31.19 | (0.16 | ) | 5.25 | 5.09 | — | (1.13 | ) | (1.13 | ) | 35.15 | 16.57 | 165,615 | (0.49 | ) | 0.98 | 0.98 | 22 | ||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 35.91 | (0.14 | ) | 0.51 | 0.37 | — | (5.09 | ) | (5.09 | ) | 31.19 | 1.61 | 17,037 | (0.45 | ) | 0.98 | 0.98 | 32 | ||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 35.85 | (0.18 | ) | 4.45 | 4.27 | — | (4.21 | ) | (4.21 | ) | 35.91 | 12.98 | 12,841 | (0.51 | ) | 0.99 | 0.99 | 28 | ||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 31.67 | (0.22 | ) | 6.08 | 5.86 | — | (1.68 | ) | (1.68 | ) | 35.85 | 18.59 | 8,497 | (0.63 | ) | 1.01 | 1.01 | 19 | ||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 20.34 | (0.05 | ) | (2.52 | ) | (2.57 | ) | (0.08 | ) | (0.80 | ) | (0.88 | ) | 16.89 | (12.69 | ) | 401,757 | (0.45 | ) | 1.13 | 1.13 | 26 | ||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 17.61 | (0.11 | ) | 3.15 | 3.04 | (0.06 | ) | (0.25 | ) | (0.31 | ) | 20.34 | 17.44 | 476,786 | (0.57 | ) | 1.13 | 1.13 | 30 | |||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 15.65 | (0.11 | ) | 2.63 | 2.52 | — | (0.56 | ) | (0.56 | ) | 17.61 | 16.40 | 335,185 | (0.64 | ) | 1.13 | 1.13 | 22 | ||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 18.05 | (0.10 | ) | 0.26 | 0.16 | — | (2.56 | ) | (2.56 | ) | 15.65 | 1.43 | 268,390 | (0.60 | ) | 1.13 | 1.13 | 32 | ||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 18.04 | (0.11 | ) | 2.24 | 2.13 | — | (2.12 | ) | (2.12 | ) | 18.05 | 12.86 | 262,426 | (0.66 | ) | 1.14 | 1.14 | 28 | ||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 15.96 | (0.14 | ) | 3.07 | 2.93 | — | (0.85 | ) | (0.85 | ) | 18.04 | 18.42 | 285,287 | (0.78 | ) | 1.16 | 1.16 | 19 | ||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 19.46 | (0.07 | ) | (2.43 | ) | (2.50 | ) | (0.04 | ) | (0.76 | ) | (0.80 | ) | 16.16 | (12.84 | ) | 14,798 | (0.70 | ) | 1.38 | 1.38 | 26 | ||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 16.85 | (0.15 | ) | 3.02 | 2.87 | (0.02 | ) | (0.24 | ) | (0.26 | ) | 19.46 | 17.21 | 18,449 | (0.82 | ) | 1.38 | 1.38 | 30 | |||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 15.02 | (0.14 | ) | 2.51 | 2.37 | — | (0.54 | ) | (0.54 | ) | 16.85 | 16.04 | 32,852 | (0.89 | ) | 1.38 | 1.38 | 22 | ||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 17.35 | (0.13 | ) | 0.26 | 0.13 | — | (2.46 | ) | (2.46 | ) | 15.02 | 1.27 | 9,704 | (0.85 | ) | 1.38 | 1.38 | 32 | ||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 17.39 | (0.15 | ) | 2.15 | 2.00 | — | (2.04 | ) | (2.04 | ) | 17.35 | 12.54 | 6,348 | (0.91 | ) | 1.39 | 1.39 | 28 | ||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 15.43 | (0.18 | ) | 2.96 | 2.78 | — | (0.82 | ) | (0.82 | ) | 17.39 | 18.07 | 7,300 | (1.03 | ) | 1.41 | 1.41 | 19 | ||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY SMALL-CAP FUNDAMENTAL VALUE FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 29.16 | 0.14 | (4.54 | ) | (4.40 | ) | (0.21 | ) | (2.93 | ) | (3.14 | ) | 21.62 | (15.25 | ) | 442,209 | 1.01 | 0.96 | 0.96 | 24 | ||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 27.11 | 0.15 | 3.11 | 3.26 | (0.20 | ) | (1.01 | ) | (1.21 | ) | 29.16 | 12.13 | 410,785 | 0.52 | 0.97 | 0.97 | 32 | |||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 22.75 | 0.17 | 4.31 | 4.48 | (0.09 | ) | (0.03 | ) | (0.12 | ) | 27.11 | 19.73 | 341,038 | 0.68 | 0.97 | 0.97 | 30 | |||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 23.61 | 0.13 | (0.44 | ) | (0.31 | ) | (0.10 | ) | (0.45 | ) | (0.55 | ) | 22.75 | (1.17 | ) | 156,205 | 0.59 | 0.98 | 0.98 | 30 | ||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 23.96 | 0.10 | 0.86 | 0.96 | (0.14 | ) | (1.17 | ) | (1.31 | ) | 23.61 | 4.04 | 75,994 | 0.43 | 0.98 | 0.98 | 26 | |||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 20.06 | 0.12 | 4.91 | 5.03 | (0.19 | ) | (0.94 | ) | (1.13 | ) | 23.96 | 25.37 | 19,515 | 0.51 | 1.00 | 1.00 | 30 | |||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 29.12 | 0.12 | (4.53 | ) | (4.41 | ) | (0.16 | ) | (2.93 | ) | (3.09 | ) | 21.62 | (15.31 | ) | 504,167 | 0.86 | 1.11 | 1.11 | 24 | ||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 27.08 | 0.10 | 3.10 | 3.20 | (0.15 | ) | (1.01 | ) | (1.16 | ) | 29.12 | 11.95 | 874,269 | 0.37 | 1.12 | 1.12 | 32 | |||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 22.73 | 0.13 | 4.31 | 4.44 | (0.06 | ) | (0.03 | ) | (0.09 | ) | 27.08 | 19.54 | 834,317 | 0.53 | 1.12 | 1.12 | 30 | |||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 23.59 | 0.10 | (0.44 | ) | (0.34 | ) | (0.07 | ) | (0.45 | ) | (0.52 | ) | 22.73 | (1.32 | ) | 774,547 | 0.44 | 1.13 | 1.13 | 30 | ||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 23.94 | 0.07 | 0.86 | 0.93 | (0.11 | ) | (1.17 | ) | (1.28 | ) | 23.59 | 3.90 | 748,003 | 0.28 | 1.13 | 1.13 | 26 | |||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 20.06 | 0.08 | 4.90 | 4.98 | (0.16 | ) | (0.94 | ) | (1.10 | ) | 23.94 | 25.13 | 567,799 | 0.36 | 1.15 | 1.15 | 30 | |||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 28.98 | 0.09 | (4.50 | ) | (4.41 | ) | (0.09 | ) | (2.93 | ) | (3.02 | ) | 21.55 | (15.40 | ) | 16,942 | 0.61 | 1.36 | 1.36 | 24 | ||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 26.95 | 0.03 | 3.08 | 3.11 | (0.07 | ) | (1.01 | ) | (1.08 | ) | 28.98 | 11.65 | 25,032 | 0.12 | 1.37 | 1.37 | 32 | |||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 22.62 | 0.07 | 4.29 | 4.36 | — | (0.03 | ) | (0.03 | ) | 26.95 | 19.29 | 24,974 | 0.28 | 1.37 | 1.37 | 30 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 23.48 | 0.04 | (0.44 | ) | (0.40 | ) | (0.01 | ) | (0.45 | ) | (0.46 | ) | 22.62 | (1.58 | ) | 52,883 | 0.19 | 1.38 | 1.38 | 30 | ||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 23.87 | 0.01 | 0.85 | 0.86 | (0.08 | ) | (1.17 | ) | (1.25 | ) | 23.48 | 3.61 | 58,583 | 0.03 | 1.38 | 1.38 | 26 | |||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 20.01 | 0.02 | 4.89 | 4.91 | (0.11 | ) | (0.94 | ) | (1.05 | ) | 23.87 | 24.83 | 21,416 | 0.11 | 1.40 | 1.40 | 30 |
The accompanying notes are an integral part of these financial statements.
113
Financial Highlights
From Investment | Distributions to | Ratios to Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations(a) | Shareholders From | Net Assets(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a Share | Realized | Net | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Net Asset | Net | & | Asset | Assets at | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Throughout | Value, | Investment | Unrealized | Net | Net | Value, | End of | Investment | Gross | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Each Fiscal Period: | Beginning | Income | Gains | Investment | Realized | End of | Total | Period | Income | Net | Expenses | Turnover | |||||||||||||||||||||||||||||||||||||||||||||||
Beginning | Ending | of Period | (Loss) | (Losses) | Total | Income | Gains | Total | Period | Return(c) | (000’s | ) | (Loss) | Expenses | (d) | Rate(c) | |||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY GLOBAL LEADERS FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10/31/18^ | 12/31/18 | $ | 13.13 | — | (0.43 | ) | (0.43 | ) | (0.03 | ) | — | (0.03 | ) | $ | 12.67 | (3.25 | )% | $ | 127,984 | 0.07 | % | 0.75 | % | 0.93 | % | 18 | % | ||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 13.82 | — | (1.12 | ) | (1.12 | ) | (0.03 | ) | — | (0.03 | ) | 12.67 | (8.08 | ) | 11,519 | (0.04 | ) | 0.85 | 1.08 | 18 | ||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 11.50 | 0.08 | 2.25 | 2.33 | (0.01 | ) | — | (0.01 | ) | 13.82 | 20.28 | 86,112 | 0.60 | 0.85 | 1.10 | 26 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 9.65 | 0.04 | 1.83 | 1.87 | (0.02 | ) | — | (0.02 | ) | 11.50 | 19.39 | 39,354 | 0.39 | 0.85 | 1.16 | 35 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15^ | 06/30/16 | 10.00 | 0.05 | (0.40 | ) | (0.35 | ) | — | — | — | 9.65 | (3.50 | ) | 26,367 | 0.55 | 0.85 | 1.41 | 53 | |||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY INTERMEDIATE INCOME FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 10.35 | 0.13 | (0.01 | ) | 0.12 | (0.12 | ) | — | (0.12 | ) | 10.35 | 1.22 | 127,629 | 2.59 | 0.47 | 0.52 | 42 | |||||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.60 | 0.23 | (0.24 | ) | (0.01 | ) | (0.24 | ) | — | (0.24 | ) | 10.35 | (0.12 | ) | 125,060 | 2.20 | 0.45 | 0.51 | 35 | |||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 10.78 | 0.20 | (0.16 | ) | 0.04 | (0.22 | ) | — | (0.22 | ) | 10.60 | 0.40 | 131,941 | 1.88 | 0.45 | 0.51 | 62 | |||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 10.63 | 0.20 | 0.22 | 0.42 | (0.21 | ) | (0.06 | ) | (0.27 | ) | 10.78 | 3.99 | 137,900 | 1.92 | 0.43 | 0.50 | 68 | |||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.74 | 0.19 | (0.08 | ) | 0.11 | (0.22 | ) | — | (0.22 | ) | 10.63 | 1.01 | 140,006 | 1.78 | 0.45 | 0.50 | 130 | |||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 10.85 | 0.17 | 0.12 | 0.29 | (0.18 | ) | (0.22 | ) | (0.40 | ) | 10.74 | 2.66 | 207,371 | 1.54 | 0.52 | 0.52 | 162 | |||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 10.13 | 0.12 | (0.01 | ) | 0.11 | (0.11 | ) | — | (0.11 | ) | 10.13 | 1.12 | 3,512 | 2.34 | 0.72 | 0.77 | 42 | |||||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.38 | 0.20 | (0.24 | ) | (0.04 | ) | (0.21 | ) | — | (0.21 | ) | 10.13 | (0.38 | ) | 3,782 | 1.95 | 0.70 | 0.76 | 35 | |||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 10.56 | 0.17 | (0.15 | ) | 0.02 | (0.20 | ) | — | (0.20 | ) | 10.38 | 0.16 | 4,098 | 1.63 | 0.70 | 0.76 | 62 | |||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 10.42 | 0.17 | 0.21 | 0.38 | (0.18 | ) | (0.06 | ) | (0.24 | ) | 10.56 | 3.71 | 8,972 | 1.67 | 0.68 | 0.75 | 68 | |||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.53 | 0.16 | (0.08 | ) | 0.08 | (0.19 | ) | — | (0.19 | ) | 10.42 | 0.78 | 9,608 | 1.53 | 0.70 | 0.75 | 130 | |||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 10.65 | 0.14 | 0.11 | 0.25 | (0.15 | ) | (0.22 | ) | (0.37 | ) | 10.53 | 2.36 | 12,613 | 1.29 | 0.77 | 0.77 | 162 | |||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY TOTAL RETURN FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 9.78 | 0.16 | (0.08 | ) | 0.08 | (0.16 | ) | — | (0.16 | ) | 9.70 | 0.80 | 175,796 | 3.22 | 0.49 | 0.49 | 66 | |||||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.00 | 0.28 | (0.22 | ) | 0.06 | (0.28 | ) | — | (0.28 | ) | 9.78 | 0.61 | 121,381 | 2.79 | 0.50 | 0.50 | 209 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 10.18 | 0.24 | (0.16 | ) | 0.08 | (0.25 | ) | (0.01 | ) | (0.26 | ) | 10.00 | 0.80 | 107,686 | 2.36 | 0.51 | 0.51 | 216 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 9.83 | 0.25 | 0.37 | 0.62 | (0.27 | ) | — | (0.27 | ) | 10.18 | 6.46 | 83,854 | 2.55 | 0.51 | 0.51 | 218 | ||||||||||||||||||||||||||||||||||||||||||
10/30/14^ | 06/30/15 | 10.00 | 0.13 | (0.19 | ) | (0.06 | ) | (0.11 | ) | — | (0.11 | ) | 9.83 | (0.60 | ) | 73,735 | 1.89 | 0.54 | 0.54 | 235 | |||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 9.78 | 0.15 | (0.08 | ) | 0.07 | (0.15 | ) | — | (0.15 | ) | 9.70 | 0.78 | 3,397 | 3.17 | 0.54 | 0.54 | 66 | |||||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.00 | 0.27 | (0.21 | ) | 0.06 | (0.28 | ) | — | (0.28 | ) | 9.78 | 0.56 | 2,619 | 2.74 | 0.55 | 0.55 | 209 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 10.18 | 0.23 | (0.16 | ) | 0.07 | (0.24 | ) | (0.01 | ) | (0.25 | ) | 10.00 | 0.75 | 2,668 | 2.31 | 0.56 | 0.56 | 216 | ||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 9.83 | 0.25 | 0.37 | 0.62 | (0.27 | ) | — | (0.27 | ) | 10.18 | 6.40 | 1,957 | 2.50 | 0.56 | 0.56 | 218 | ||||||||||||||||||||||||||||||||||||||||||
10/30/14^ | 06/30/15 | 10.00 | 0.12 | (0.18 | ) | (0.06 | ) | (0.11 | ) | — | (0.11 | ) | 9.83 | (0.63 | ) | 9,081 | 1.84 | 0.59 | 0.59 | 235 |
The accompanying notes are an integral part of these financial statements.
114
Financial Highlights
From Investment | Distributions to | Ratios to Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations(a) | Shareholders From | Net Assets(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a Share | Realized | Net | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Net Asset | Net | & | Asset | Assets at | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Throughout | Value, | Investment | Unrealized | Net | Net | Value, | End of | Investment | Gross | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Each Fiscal Period: | Beginning | Income | Gains | Investment | Realized | End of | Total | Period | Income | Net | Expenses | Turnover | |||||||||||||||||||||||||||||||||||||||||||||||
Beginning | Ending | of Period | (Loss) | (Losses) | Total | Income | Gains | Total | Period | Return(c) | (000’s | ) | (Loss) | Expenses | (d) | Rate(c) | |||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY STRATEGIC BOND FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | $ | 9.51 | 0.16 | (0.14 | ) | 0.02 | (0.17 | ) | — | (0.17 | ) | $ | 9.36 | 0.20 | % | $ | 180,860 | 3.42 | % | 0.59 | % | 0.59 | % | 71 | % | |||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 9.61 | 0.27 | (0.10 | ) | 0.17 | (0.27 | ) | — | (0.27 | ) | 9.51 | 1.80 | 141,150 | 2.85 | 0.70 | 0.67 | 200 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 9.47 | 0.23 | 0.14 | 0.37 | (0.23 | ) | — | (0.23 | ) | 9.61 | 3.92 | 114,651 | 2.39 | 0.70 | 0.72 | 259 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 9.83 | 0.30 | (0.19 | ) | 0.11 | (0.47 | ) | — | (0.47 | ) | 9.47 | 1.18 | 39,211 | 3.21 | 0.70 | 0.73 | 288 | |||||||||||||||||||||||||||||||||||||||||
10/31/14^ | 06/30/15 | 10.07 | 0.16 | (0.35 | ) | (0.19 | ) | (0.05 | ) | — | (0.05 | ) | 9.83 | (1.85 | ) | 59,680 | 2.42 | 0.70 | 0.72 | 317 | |||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 9.51 | 0.16 | (0.14 | ) | 0.02 | (0.17 | ) | — | (0.17 | ) | 9.36 | 0.17 | 1,062 | 3.37 | 0.64 | 0.64 | 71 | |||||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 9.61 | 0.25 | (0.10 | ) | 0.15 | (0.25 | ) | — | (0.25 | ) | 9.51 | 1.54 | 214 | 2.60 | 0.95 | 0.92 | 200 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 9.47 | 0.20 | 0.14 | 0.34 | (0.20 | ) | — | (0.20 | ) | 9.61 | 3.65 | 248 | 2.14 | 0.95 | 0.97 | 259 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 9.82 | 0.28 | (0.20 | ) | 0.08 | (0.43 | ) | — | (0.43 | ) | 9.47 | 0.84 | 865 | 2.96 | 0.95 | 0.98 | 288 | |||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.04 | 0.19 | (0.37 | ) | (0.18 | ) | (0.04 | ) | — | (0.04 | ) | 9.82 | (1.80 | ) | 1,692 | 1.91 | 1.21 | 1.22 | 317 | |||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 9.68 | (0.01 | ) | 0.42 | 0.41 | (0.05 | ) | — | (0.05 | ) | 10.04 | 4.22 | 24,399 | (0.07 | ) | 1.33 | 1.33 | 1,010 | ||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY SUSTAINABLE BOND FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/02/18^ | 12/31/18 | 9.70 | 0.14 | (0.05 | ) | 0.09 | (0.14 | ) | — | (0.14 | ) | 9.65 | 0.97 | 84,322 | 2.99 | 0.55 | 0.52 | 21 | |||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 9.70 | 0.14 | (0.05 | ) | 0.09 | (0.14 | ) | — | (0.14 | ) | 9.65 | 0.95 | 8,378 | 2.94 | 0.60 | 0.57 | 21 | |||||||||||||||||||||||||||||||||||||||||
08/07/17^ | 06/30/18 | 10.00 | 0.21 | (0.34 | ) | (0.13 | ) | (0.17 | ) | — | (0.17 | ) | 9.70 | (1.27 | ) | 54,291 | 2.41 | 0.60 | 0.71 | 64 | |||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY MARYLAND BOND FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 10.50 | 0.14 | (0.02 | ) | 0.12 | (0.14 | ) | — | (0.14 | ) | 10.48 | 1.13 | 179,147 | 2.60 | 0.49 | 0.49 | 21 | |||||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.62 | 0.26 | (0.12 | ) | 0.14 | (0.26 | ) | — | (0.26 | ) | 10.50 | 1.29 | 181,230 | 2.42 | 0.48 | 0.48 | 25 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 10.92 | 0.23 | (0.26 | ) | (0.03 | ) | (0.23 | ) | (0.04 | ) | (0.27 | ) | 10.62 | (0.27 | ) | 181,518 | 2.14 | 0.49 | 0.49 | 53 | ||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 10.65 | 0.23 | 0.32 | 0.55 | (0.23 | ) | (0.05 | ) | (0.28 | ) | 10.92 | 5.24 | 183,705 | 2.12 | 0.48 | 0.48 | 80 | |||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.82 | 0.18 | (0.12 | ) | 0.06 | (0.18 | ) | (0.05 | ) | (0.23 | ) | 10.65 | 0.58 | 199,469 | 1.66 | 0.49 | 0.49 | 61 | ||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 10.81 | 0.21 | 0.10 | 0.31 | (0.21 | ) | (0.09 | ) | (0.30 | ) | 10.82 | 2.94 | 205,717 | 1.99 | 0.52 | 0.52 | 56 | |||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY TAX-EXEMPT BOND FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/02/18^ | 12/31/18 | 9.90 | 0.16 | (0.02 | ) | 0.14 | (0.16 | ) | — | (0.16 | ) | 9.88 | 1.46 | 586,313 | 3.35 | 0.43 | 0.43 | 43 | |||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 9.90 | 0.16 | (0.03 | ) | 0.13 | (0.16 | ) | — | (0.16 | ) | 9.87 | 1.36 | 39,354 | 3.30 | 0.48 | 0.48 | 43 | |||||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 9.94 | 0.31 | (0.04 | ) | 0.27 | (0.31 | ) | — | (0.31 | ) | 9.90 | 2.78 | 439,906 | 3.16 | 0.48 | 0.48 | 55 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 10.26 | 0.29 | (0.32 | ) | (0.03 | ) | (0.29 | ) | — | (0.29 | ) | 9.94 | (0.29 | ) | 257,602 | 2.88 | 0.49 | 0.49 | 55 | |||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 9.93 | 0.25 | 0.33 | 0.58 | (0.25 | ) | — | (0.25 | ) | 10.26 | 5.94 | 233,675 | 2.51 | 0.49 | 0.49 | 119 | ||||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.03 | 0.18 | (0.10 | ) | 0.08 | (0.18 | ) | — | (0.18 | ) | 9.93 | 0.78 | 224,154 | 1.78 | 0.50 | 0.50 | 109 | |||||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 9.84 | 0.19 | 0.19 | 0.38 | (0.19 | ) | (— | )(e) | (0.19 | ) | 10.03 | 3.94 | 205,177 | 1.96 | 0.52 | 0.52 | 157 |
The accompanying notes are an integral part of these financial statements.
115
Financial Highlights
From Investment | Distributions to | Ratios to Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations(a) | Shareholders From | Net Assets(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a Share | Realized | Net | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Net Asset | Net | & | Asset | Assets at | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Throughout | Value, | Investment | Unrealized | Net | Net | Value, | End of | Investment | Gross | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Each Fiscal Period: | Beginning | Income | Gains | Investment | Realized | End of | Total | Period | Income | Net | Expenses | Turnover | |||||||||||||||||||||||||||||||||||||||||||||||
Beginning | Ending | of Period | (Loss) | (Losses) | Total | Income | Gains | Total | Period | Return(c) | (000’s | ) | (Loss) | Expenses | (d) | Rate(c) | |||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY MORTGAGE SECURITIES FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | $ | 9.65 | 0.12 | 0.04 | 0.16 | (0.15 | ) | — | (0.15 | ) | $ | 9.66 | 1.63 | % | $ | 295,277 | 2.47 | % | 0.47 | % | 0.47 | % | 132 | % | ||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 9.87 | 0.18 | (0.16 | ) | 0.02 | (0.24 | ) | — | (0.24 | ) | 9.65 | 0.16 | 300,643 | 1.86 | 0.47 | 0.47 | 336 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 10.20 | 0.15 | (0.21 | ) | (0.06 | ) | (0.20 | ) | (0.07 | ) | (0.27 | ) | 9.87 | (0.52 | ) | 342,705 | 1.53 | 0.46 | 0.46 | 414 | ||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 10.06 | 0.22 | 0.21 | 0.43 | (0.25 | ) | (0.04 | ) | (0.29 | ) | 10.20 | 4.32 | 377,908 | 2.12 | 0.45 | 0.45 | 244 | |||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.16 | 0.27 | 0.01 | 0.28 | (0.30 | ) | (0.08 | ) | (0.38 | ) | 10.06 | 2.74 | 206,299 | 2.68 | 0.47 | 0.47 | 147 | |||||||||||||||||||||||||||||||||||||||||
05/13/14^ | 06/30/14 | 10.15 | 0.03 | 0.02 | 0.05 | (0.04 | ) | — | (0.04 | ) | 10.16 | 0.49 | 131,415 | 1.98 | 0.52 | 0.52 | 88 | ||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 9.66 | 0.12 | 0.02 | 0.14 | (0.14 | ) | — | (0.14 | ) | 9.66 | 1.50 | 268 | 2.42 | 0.52 | 0.52 | 132 | ||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 9.87 | 0.18 | (0.16 | ) | 0.02 | (0.23 | ) | — | (0.23 | ) | 9.66 | 0.21 | 321 | 1.81 | 0.52 | 0.52 | 336 | |||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 10.21 | 0.15 | (0.22 | ) | (0.07 | ) | (0.20 | ) | (0.07 | ) | (0.27 | ) | 9.87 | (0.68 | ) | 738 | 1.48 | 0.51 | 0.51 | 414 | ||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 10.06 | 0.21 | 0.22 | 0.43 | (0.24 | ) | (0.04 | ) | (0.28 | ) | 10.21 | 4.33 | 1,793 | 2.07 | 0.50 | 0.50 | 244 | |||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.16 | 0.27 | — | 0.27 | (0.29 | ) | (0.08 | ) | (0.37 | ) | 10.06 | 2.68 | 28,649 | 2.63 | 0.52 | 0.52 | 147 | |||||||||||||||||||||||||||||||||||||||||
12/26/13^ | 06/30/14 | 10.00 | 0.10 | 0.16 | 0.26 | (0.10 | ) | — | (0.10 | ) | 10.16 | 2.62 | 67,776 | 1.93 | 0.57 | 0.57 | 88 | ||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY – WMC STRATEGIC EUROPEAN EQUITY FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 12.42 | (0.02 | ) | (1.62 | ) | (1.64 | ) | (0.20 | ) | (0.98 | ) | (1.18 | ) | 9.60 | (13.18 | ) | 594,177 | (0.28 | ) | 1.09 | 1.09 | 14 | ||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 12.05 | 0.13 | 0.35 | 0.48 | (0.11 | ) | — | (0.11 | ) | 12.42 | 3.97 | 927,916 | 1.03 | 1.07 | 1.07 | 33 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 9.90 | 0.12 | 2.16 | 2.28 | (0.13 | ) | — | (0.13 | ) | 12.05 | 23.32 | 1,176,492 | 1.10 | 1.09 | 1.09 | 27 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 10.20 | 0.13 | (0.40 | ) | (0.27 | ) | (0.03 | ) | — | (0.03 | ) | 9.90 | (2.68 | ) | 1,059,870 | 1.30 | 1.11 | 1.11 | 31 | |||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.46 | 0.14 | (0.29 | ) | (0.15 | ) | (0.11 | ) | — | (0.11 | ) | 10.20 | (1.42 | ) | 240,182 | 1.35 | 1.13 | 1.13 | 48 | |||||||||||||||||||||||||||||||||||||||
10/21/13^ | 06/30/14 | 10.00 | 0.14 | 0.32 | 0.46 | — | — | — | 10.46 | 4.60 | 202,616 | 2.01 | 1.23 | 1.23 | 25 | ||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 12.41 | (0.03 | ) | (1.62 | ) | (1.65 | ) | (0.19 | ) | (0.98 | ) | (1.17 | ) | 9.59 | (13.26 | ) | 13,130 | (0.43 | ) | 1.24 | 1.24 | 14 | ||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 12.05 | 0.11 | 0.36 | 0.47 | (0.11 | ) | — | (0.11 | ) | 12.41 | 3.85 | 14,669 | 0.88 | 1.22 | 1.22 | 33 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 9.90 | 0.10 | 2.17 | 2.27 | (0.12 | ) | — | (0.12 | ) | 12.05 | 23.18 | 7,367 | 0.95 | 1.24 | 1.24 | 27 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 10.19 | 0.12 | (0.41 | ) | (0.29 | ) | — | — | — | 9.90 | (2.85 | ) | 13,031 | 1.15 | 1.26 | 1.26 | 31 | |||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.45 | 0.12 | (0.29 | ) | (0.17 | ) | (0.09 | ) | — | (0.09 | ) | 10.19 | (1.56 | ) | 25,840 | 1.20 | 1.28 | 1.28 | 48 | |||||||||||||||||||||||||||||||||||||||
10/21/13^ | 06/30/14 | 10.00 | 0.13 | 0.32 | 0.45 | — | — | — | 10.45 | 4.50 | 18,011 | 1.86 | 1.38 | 1.38 | 25 | ||||||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 12.30 | (0.04 | ) | (1.61 | ) | (1.65 | ) | (0.15 | ) | (0.98 | ) | (1.13 | ) | 9.52 | (13.33 | ) | 7,783 | (0.68 | ) | 1.49 | 1.49 | 14 | ||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 11.98 | 0.08 | 0.35 | 0.43 | (0.11 | ) | — | (0.11 | ) | 12.30 | 3.54 | 13,313 | 0.63 | 1.47 | 1.47 | 33 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 9.85 | 0.08 | 2.15 | 2.23 | (0.10 | ) | — | (0.10 | ) | 11.98 | 22.91 | 10,740 | 0.70 | 1.49 | 1.49 | 27 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 10.17 | 0.09 | (0.41 | ) | (0.32 | ) | — | — | — | 9.85 | (3.15 | ) | 745 | 0.90 | 1.51 | 1.51 | 31 | |||||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.44 | 0.10 | (0.29 | ) | (0.19 | ) | (0.08 | ) | — | (0.08 | ) | 10.17 | (1.78 | ) | 1,076 | 0.95 | 1.53 | 1.53 | 48 | |||||||||||||||||||||||||||||||||||||||
10/21/13^ | 06/30/14 | 10.00 | 0.11 | 0.33 | 0.44 | — | — | — | 10.44 | 4.40 | 240 | 1.61 | 1.63 | 1.63 | 25 |
The accompanying notes are an integral part of these financial statements.
116
Financial Highlights
From Investment | Distributions to | Ratios to Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations(a) | Shareholders From | Net Assets(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a Share | Realized | Net | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Net Asset | Net | & | Asset | Assets at | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Throughout | Value, | Investment | Unrealized | Net | Net | Value, | End of | Investment | Gross | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Each Fiscal Period: | Beginning | Income | Gains | Investment | Realized | End of | Total | Period | Income | Net | Expenses | Turnover | |||||||||||||||||||||||||||||||||||||||||||||||
Beginning | Ending | of Period | (Loss) | (Losses) | Total | Income | Gains | Total | Period | Return(c) | (000’s | ) | (Loss) | Expenses | (d) | Rate(c) | |||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY – WMC JAPAN ALPHA OPPORTUNITIES FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | $ | 10.71 | 0.03 | (1.71 | ) | (1.68 | ) | (0.65 | ) | (2.12 | ) | (2.77 | ) | $ | 6.26 | (15.95 | )% | $ | 273,417 | 0.54 | % | 1.22 | % | 1.22 | % | 26 | % | |||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.89 | 0.09 | 0.70 | 0.79 | — | (0.97 | ) | (0.97 | ) | 10.71 | 6.75 | 1,487,584 | 0.77 | 1.15 | 1.15 | 62 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 8.83 | 0.08 | 1.98 | 2.06 | — | — | — | 10.89 | 23.33 | 985,654 | 0.80 | 1.15 | 1.15 | 100 | ||||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 12.83 | 0.06 | (2.91 | ) | (2.85 | ) | (0.95 | ) | (0.20 | ) | (1.15 | ) | 8.83 | (24.02 | ) | 1,828,840 | 0.53 | 1.14 | 1.14 | 105 | ||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.50 | 0.05 | 2.86 | 2.91 | (0.51 | ) | (0.07 | ) | (0.58 | ) | 12.83 | 28.62 | 1,582,214 | 0.41 | 1.15 | 1.15 | 70 | |||||||||||||||||||||||||||||||||||||||||
03/04/14^ | 06/30/14 | 10.00 | 0.05 | 0.45 | 0.50 | — | — | — | 10.50 | 5.00 | 1,080,717 | 1.59 | 1.21 | 1.21 | 26 | ||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 10.65 | 0.02 | (1.69 | ) | (1.67 | ) | (0.64 | ) | (2.12 | ) | (2.76 | ) | 6.22 | (15.95 | ) | 1,534 | 0.39 | 1.37 | 1.37 | 26 | ||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.85 | 0.07 | 0.70 | 0.77 | — | (0.97 | ) | (0.97 | ) | 10.65 | 6.58 | 2,461 | 0.62 | 1.30 | 1.30 | 62 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 8.81 | 0.07 | 1.97 | 2.04 | — | — | — | 10.85 | 23.16 | 2,814 | 0.65 | 1.30 | 1.30 | 100 | ||||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 12.82 | 0.04 | (2.91 | ) | (2.87 | ) | (0.94 | ) | (0.20 | ) | (1.14 | ) | 8.81 | (24.20 | ) | 1,595 | 0.38 | 1.29 | 1.29 | 105 | ||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.49 | 0.03 | 2.87 | 2.90 | (0.50 | ) | (0.07 | ) | (0.57 | ) | 12.82 | 28.57 | 25,628 | 0.26 | 1.30 | 1.30 | 70 | |||||||||||||||||||||||||||||||||||||||||
03/04/14^ | 06/30/14 | 10.00 | 0.05 | 0.44 | 0.49 | — | — | — | 10.49 | 4.90 | 4,522 | 1.44 | 1.36 | 1.36 | 26 | ||||||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 10.56 | 0.01 | (1.68 | ) | (1.67 | ) | (0.63 | ) | (2.12 | ) | (2.75 | ) | 6.14 | (16.07 | ) | 198 | 0.14 | 1.62 | 1.62 | 26 | ||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.79 | 0.04 | 0.70 | 0.74 | — | (0.97 | ) | (0.97 | ) | 10.56 | 6.33 | 288 | 0.37 | 1.55 | 1.55 | 62 | ||||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 8.78 | 0.04 | 1.97 | 2.01 | — | — | — | 10.79 | 22.89 | 388 | 0.40 | 1.55 | 1.55 | 100 | ||||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 12.79 | 0.01 | (2.90 | ) | (2.89 | ) | (0.92 | ) | (0.20 | ) | (1.12 | ) | 8.78 | (24.39 | ) | 687 | 0.13 | 1.54 | 1.54 | 105 | ||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.48 | — | 2.87 | 2.87 | (0.49 | ) | (0.07 | ) | (0.56 | ) | 12.79 | 28.22 | 1,670 | 0.01 | 1.55 | 1.55 | 70 | |||||||||||||||||||||||||||||||||||||||||
03/04/14^ | 06/30/14 | 10.00 | 0.04 | 0.44 | 0.48 | — | — | — | 10.48 | 4.80 | 59 | 1.19 | 1.61 | 1.61 | 26 | ||||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY – SOMERSET EMERGING MARKETS FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 10.06 | 0.05 | (1.16 | ) | (1.11 | ) | (0.35 | ) | — | (0.35 | ) | 8.60 | (11.00 | ) | 186,026 | 1.02 | 1.24 | 1.24 | 12 | |||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.17 | 0.17 | (0.17 | ) | — | (0.11 | ) | — | (0.11 | ) | 10.06 | (0.12 | ) | 513,535 | 1.57 | 1.15 | 1.15 | 13 | ||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 8.73 | 0.12 | 1.43 | 1.55 | (0.11 | ) | — | (0.11 | ) | 10.17 | 18.04 | 407,616 | 1.31 | 1.17 | 1.17 | 23 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 9.74 | 0.13 | (1.05 | ) | (0.92 | ) | (0.09 | ) | — | (0.09 | ) | 8.73 | (9.40 | ) | 319,993 | 1.56 | 1.17 | 1.17 | 19 | |||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.22 | 0.13 | (0.46 | ) | (0.33 | ) | (0.15 | ) | — | (0.15 | ) | 9.74 | (3.22 | ) | 268,530 | 1.31 | 1.22 | 1.22 | 22 | |||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 9.52 | 0.20 | 0.61 | 0.81 | (0.11 | ) | — | (0.11 | ) | 10.22 | 8.62 | 193,676 | 2.08 | 1.25 | 1.25 | 19 | ||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 10.03 | 0.04 | (1.16 | ) | (1.12 | ) | (0.32 | ) | — | (0.32 | ) | 8.59 | (11.08 | ) | 26,866 | 0.87 | 1.39 | 1.39 | 12 | |||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.15 | 0.16 | (0.19 | ) | (0.03 | ) | (0.09 | ) | — | (0.09 | ) | 10.03 | (0.37 | ) | 38,106 | 1.42 | 1.30 | 1.30 | 13 | |||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 8.71 | 0.11 | 1.43 | 1.54 | (0.10 | ) | — | (0.10 | ) | 10.15 | 17.90 | 183,378 | 1.16 | 1.32 | 1.32 | 23 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 9.73 | 0.12 | (1.06 | ) | (0.94 | ) | (0.08 | ) | — | (0.08 | ) | 8.71 | (9.60 | ) | 196,841 | 1.41 | 1.32 | 1.32 | 19 | |||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.21 | 0.11 | (0.45 | ) | (0.34 | ) | (0.14 | ) | — | (0.14 | ) | 9.73 | (3.33 | ) | 155,919 | 1.16 | 1.37 | 1.37 | 22 | |||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 9.51 | 0.19 | 0.61 | 0.80 | (0.10 | ) | — | (0.10 | ) | 10.21 | 8.51 | 24,291 | 1.93 | 1.40 | 1.40 | 19 | ||||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | 10.07 | 0.03 | (1.16 | ) | (1.13 | ) | (0.30 | ) | — | (0.30 | ) | 8.64 | (11.16 | ) | 153 | 0.62 | 1.64 | 1.64 | 12 | |||||||||||||||||||||||||||||||||||||||
07/01/17 | 06/30/18 | 10.19 | 0.13 | (0.18 | ) | (0.05 | ) | (0.07 | ) | — | (0.07 | ) | 10.07 | (0.60 | ) | 172 | 1.17 | 1.55 | 1.55 | 13 | |||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 8.73 | 0.08 | 1.45 | 1.53 | (0.07 | ) | — | (0.07 | ) | 10.19 | 17.65 | 253 | 0.91 | 1.57 | 1.57 | 23 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 9.70 | 0.10 | (1.05 | ) | (0.95 | ) | (0.02 | ) | — | (0.02 | ) | 8.73 | (9.82 | ) | 281 | 1.16 | 1.57 | 1.57 | 19 | |||||||||||||||||||||||||||||||||||||||
07/01/14 | 06/30/15 | 10.18 | 0.09 | (0.46 | ) | (0.37 | ) | (0.11 | ) | — | (0.11 | ) | 9.70 | (3.60 | ) | 942 | 0.91 | 1.62 | 1.62 | 22 | |||||||||||||||||||||||||||||||||||||||
07/01/13 | 06/30/14 | 9.49 | 0.16 | 0.61 | 0.77 | (0.08 | ) | — | (0.08 | ) | 10.18 | 8.19 | 533 | 1.68 | 1.65 | 1.65 | 19 |
The accompanying notes are an integral part of these financial statements.
117
Financial Highlights
From Investment | Distributions to | Ratios to Average | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations(a) | Shareholders From | Net Assets(b) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For a Share | Realized | Net | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Net Asset | Net | & | Asset | Assets at | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Throughout | Value, | Investment | Unrealized | Net | Net | Value, | End of | Investment | Gross | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Each Fiscal Period: | Beginning | Income | Gains | Investment | Realized | End of | Total | Period | Income | Net | Expenses | Turnover | |||||||||||||||||||||||||||||||||||||||||||||||
Beginning | Ending | of Period | (Loss) | (Losses) | Total | Income | Gains | Total | Period | Return(c) | (000’s | ) | (Loss) | Expenses | (d) | Rate(c) | |||||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY – BEUTEL GOODMAN LARGE-CAP VALUE FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/18 | 12/31/18 | $ | 9.58 | 0.09 | (0.44 | ) | (0.35 | ) | (0.11 | ) | (0.09 | ) | (0.20 | ) | $ | 9.03 | (3.74 | )% | $ | 187,521 | 1.87 | % | 0.60 | % | 0.60 | % | 39 | % | |||||||||||||||||||||||||||||||
02/13/18^ | 06/30/18 | 10.00 | 0.06 | (0.48 | ) | (0.42 | ) | — | — | — | 9.58 | (4.20 | ) | 151,004 | 1.61 | 0.67 | 0.67 | 11 |
* | Redemption fees of less than $0.005/share are not presented and are included in net realized & unrealized gains (losses) from investment operations. Periods beginning after June 30, 2018 are unaudited. Prior to July 1, 2018, Brown Advisory Strategic Bond Fund Institutional Shares and Investor Shares were known as Investor Shares and Advisor Shares, respectively. |
^ | Commencement of operations. |
(a) | Calculated based on average shares outstanding during the fiscal period. |
(b) | Annualized for periods less than one year. Ratios include only income and expenses of the funds themselves, as presented in the Statements of Operations, and do not include any additional or pro rata amounts of income or expenses from the ownership of any other investment companies (as applicable). |
(c) | Not annualized for periods less than one year. Portfolio turnover rates are calculated at the fund level (not by individual share class). |
(d) | Reflects the expense ratio excluding any expense waivers or expense recoupments. |
(e) | Less than $0.005/share. |
The accompanying notes are an integral part of these financial statements.
118
Notes to Financial Statements
December 31, 2018 (Unaudited)
Note 1. Organization
The Brown Advisory Growth Equity Fund (“Growth 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 Mid-Cap Growth Fund (“Mid-Cap 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 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 Sustainable Bond Fund (“Sustainable 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 (“WMC Strategic European Equity Fund”), Brown Advisory – WMC Japan Alpha Opportunities Fund (“WMC Japan Alpha Opportunities Fund”), Brown Advisory – Somerset Emerging Markets Fund (“Somerset Emerging Markets Fund”) and Brown Advisory – Beutel Goodman Large-Cap Value Fund (“Beutel Goodman Large-Cap Value 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.
The Funds commenced operations as follows:
Institutional | Investor | Advisor | |
Shares | Shares | Shares | |
Growth Equity Fund | 10/19/2012 | 6/28/1999 | 5/18/2006 |
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 |
Mid-Cap Growth Fund | 7/2/2018 | 10/2/2017 | — |
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 |
Global Leaders Fund | 10/31/2018 | 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** | — |
Sustainable Bond Fund | 7/2/2018 | 8/7/2017 | — |
Maryland Bond Fund | — | 12/21/2000 | — |
Tax-Exempt Bond Fund | 7/2/2018 | 6/29/2012 | — |
Mortgage Securities Fund | 5/13/2014 | 12/26/2013 | — |
WMC Strategic European Equity Fund | 10/21/2013 | 10/21/2013 | 10/21/2013 |
WMC Japan Alpha Opportunities Fund | 3/4/2014 | 3/4/2014 | 3/4/2014 |
Somerset Emerging Markets Fund | 12/12/2012 | 12/12/2012 | 12/12/2012 |
Beutel Goodman Large-Cap Value Fund | 2/13/2018 | — | — |
_________________________
* | Prior to July 1, 2018, Institutional Shares were known as Investor Shares. | |
** | Prior to July 1, 2018, Investor Shares were known as Advisor 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 the basis of its relative net assets.
The investment objective of Growth Equity Fund and Small-Cap Growth Fund is to achieve capital appreciation by primarily investing in equity securities. The investment objective of 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. Mid-Cap Growth Fund seeks to achieve capital appreciation. 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
119
Notes to Financial Statements
December 31, 2018 (Unaudited)
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. Sustainable Bond Fund seeks to provide a competitive return consistent with preservation of principal while giving special considerations to certain environmental, social and governance criteria. 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 Somerset 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 WMC 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 WMC 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. 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 Beutel Goodman Large-Cap Value Fund seeks to achieve capital appreciation.
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 an 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. Investments in other domestic investment companies (open-ended mutual funds) are valued at their reported Net Asset Value (“NAV”) and are typically categorized as Level 1 securities. Investments in Exchange Traded Funds (“ETFs”) and Closed-End Funds are valued at their last reported sale price and are typically categorized as Level 1 securities.
For foreign securities that are traded on foreign exchanges, the Funds have selected ICE Data Services (“ICE”) to provide pricing data for those such securities that are held by the Funds. The use of ICE’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 determining whether or not to utilize these prices provided by ICE. 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. ICE provides a confidence interval for each foreign exchange traded security for which it provides a price. If the confidence interval provided by ICE 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 ICE 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
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Notes to Financial Statements
December 31, 2018 (Unaudited)
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 when the amortized cost value is determined to approximate fair value established using market-based and issuer-specific factors. 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.
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 significant unobservable inputs are utilized in the determination of the fair value. 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, 2018, the Small-Cap Growth Fund, Total Return Fund, Strategic Bond Fund, and Mortgage Securities Fund held Level 3 securities for which significant and unobservable inputs or assumptions were used in the determination of fair value. The total market value of such securities held as of December 31, 2018, was $2,569,714 or 0.3% of Small-Cap Growth Fund’s net assets, $4,582 or 0.0% of Total Return Fund’s net assets, $4,582 or 0.0% of Strategic Bond Fund’s net assets and $44,998 or 0.0% of Mortgage Securities Fund’s net assets.
The following is a summary of inputs used to value the Funds’ investments as of December 31, 2018:
Level 1 | Level 2 | Level 3 | ||||||||||
Growth Equity Fund | ||||||||||||
Common Stocks | $ | 1,647,977,118 | $ | — | $ | — | ||||||
REIT^ | 63,131,272 | — | — | |||||||||
Short-Term Investments | 60,224,037 | — | — | |||||||||
Total Investments | $ | 1,771,332,427 | $ | — | $ | — | ||||||
Flexible Equity Fund | ||||||||||||
Common Stocks | $ | 383,571,528 | $ | — | $ | — | ||||||
REIT^ | 9,812,703 | — | — | |||||||||
Closed-End Funds | 6,795,492 | — | — | |||||||||
Short-Term Investments | 883,004 | — | — | |||||||||
Total Investments | $ | 401,062,727 | $ | — | $ | — | ||||||
Equity Income Fund | ||||||||||||
Common Stocks | $ | 73,658,203 | $ | — | $ | — | ||||||
REIT^ | 5,668,573 | — | — | |||||||||
Short-Term Investments | 1,524,791 | — | — | |||||||||
Total Investments | $ | 80,851,567 | $ | — | $ | — | ||||||
Sustainable Growth Fund | ||||||||||||
Common Stocks | $ | 683,844,265 | $ | — | $ | — | ||||||
REIT^ | 35,709,020 | — | — | |||||||||
Short-Term Investments | 18,778,906 | — | — | |||||||||
Total Investments | $ | 738,332,191 | $ | — | $ | — | ||||||
Mid-Cap Growth Fund | ||||||||||||
Common Stocks | $ | 24,680,243 | $ | — | $ | — | ||||||
REIT^ | 545,246 | — | — | |||||||||
Total Investments | $ | 25,225,489 | $ | — | $ | — | ||||||
Small-Cap Growth Fund | ||||||||||||
Common Stocks | $ | 757,239,759 | $ | — | $ | — | ||||||
Private Placements | — | — | 2,569,714 | |||||||||
Short-Term Investments | 21,404,500 | — | — | |||||||||
Total Investments | $ | 778,644,259 | $ | — | $ | 2,569,714 |
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Level 1 | Level 2 | Level 3 | ||||||||||
Small-Cap Fundamental Value Fund | ||||||||||||
Common Stocks | $ | 851,580,002 | $ | — | $ | — | ||||||
REIT^ | 68,889,895 | — | — | |||||||||
Investment Companies | 28,157,063 | — | — | |||||||||
Short-Term Investments | 25,430,963 | — | — | |||||||||
Total Investments | $ | 974,057,923 | $ | — | $ | — | ||||||
Global Leaders Fund | ||||||||||||
Common Stocks: | ||||||||||||
China | $ | 2,884,437 | $ | 8,467,302 | $ | — | ||||||
France | — | 4,142,079 | — | |||||||||
Germany | — | 6,061,072 | — | |||||||||
India | — | 3,904,387 | — | |||||||||
Indonesia | — | 3,793,276 | — | |||||||||
Netherlands | — | 4,904,054 | — | |||||||||
Sweden | — | 3,937,416 | — | |||||||||
Switzerland | — | 4,257,483 | — | |||||||||
Taiwan | 4,252,696 | — | — | |||||||||
United Kingdom | — | 10,484,784 | — | |||||||||
United States | 71,469,154 | — | — | |||||||||
Short-Term Investments | 7,170,632 | — | — | |||||||||
Total Investments | $ | 85,776,919 | $ | 49,951,853 | $ | — | ||||||
Intermediate Income Fund | ||||||||||||
Corporate Bonds & Notes | $ | — | $ | 33,783,988 | $ | — | ||||||
Asset Backed Securities | — | 21,923,963 | — | |||||||||
Mortgage Backed Securities | — | 14,587,039 | — | |||||||||
Municipal Bonds | — | 10,757,098 | — | |||||||||
U.S. Treasury Notes | — | 19,523,323 | — | |||||||||
Affiliated Mutual Funds | 26,354,995 | — | — | |||||||||
Short-Term Investments | 3,381,570 | — | — | |||||||||
Total Investments | $ | 29,736,565 | $ | 100,575,411 | $ | — | ||||||
Total Return Fund | ||||||||||||
Asset Backed Securities | $ | — | $ | 52,768,180 | $ | 4,582 | ||||||
Corporate Bonds & Notes | — | 50,855,819 | — | |||||||||
Mortgage Backed Securities | — | 41,151,519 | — | |||||||||
U.S. Treasury Notes | — | 18,071,320 | — | |||||||||
Municipal Bonds | — | 6,908,960 | — | |||||||||
Preferred Stocks | 655,671 | — | — | |||||||||
Short-Term Investments | 9,078,460 | 608,842 | — | |||||||||
Total Investments | $ | 9,734,131 | $ | 170,364,640 | $ | 4,582 | ||||||
Futures Contracts – Long* | $ | 1,641,076 | $ | — | $ | — | ||||||
Futures Contracts – Short* | $ | (156,239 | ) | $ | — | $ | — | |||||
Strategic Bond Fund | ||||||||||||
Asset Backed Securities | $ | — | $ | 78,816,769 | $ | 4,582 | ||||||
Corporate Bonds & Notes | — | 70,127,149 | — | |||||||||
Mortgage Backed Securities | — | 23,305,135 | — | |||||||||
Municipal Bonds | — | 5,875,984 | — | |||||||||
Preferred Stocks | 1,218,586 | — | — | |||||||||
Closed-End Funds | 326,378 | — | — | |||||||||
Short-Term Investments | 4,879,460 | — | — | |||||||||
Total Investments | $ | 6,424,424 | $ | 178,125,037 | $ | 4,582 | ||||||
Sustainable Bond Fund | ||||||||||||
Corporate Bonds & Notes | $ | — | $ | 36,716,745 | $ | — | ||||||
Mortgage Backed Securities | — | 23,685,313 | — | |||||||||
Municipal Bonds | — | 10,970,878 | — | |||||||||
Foreign Government Bonds | — | 8,087,090 | — | |||||||||
Asset Backed Securities | — | 4,832,684 | — | |||||||||
U.S. Treasury Notes | — | 7,689,656 | — | |||||||||
Short-Term Investments | 1,608,114 | — | — | |||||||||
Total Investments | $ | 1,608,114 | $ | 91,982,366 | $ | — | ||||||
Futures Contracts – Long* | $ | 422,666 | $ | — | $ | — | ||||||
Futures Contracts – Short* | $ | (369,144 | ) | $ | — | $ | — | |||||
Maryland Bond Fund | ||||||||||||
Municipal Bonds | $ | — | $ | 175,977,212 | $ | — | ||||||
Short-Term Investments | 962,696 | — | — | |||||||||
Total Investments | $ | 962,696 | $ | 175,977,212 | $ | — | ||||||
Tax-Exempt Bond Fund | ||||||||||||
Municipal Bonds | $ | — | $ | 614,195,003 | $ | — | ||||||
Short-Term Investments | 1,849,200 | — | — | |||||||||
Total Investments | $ | 1,849,200 | $ | 614,195,003 | $ | — | ||||||
Mortgage Securities Fund | ||||||||||||
Mortgage Backed Securities | $ | — | $ | 264,189,819 | $ | — | ||||||
Asset Backed Securities | — | 35,615,128 | 44,998 | |||||||||
Municipal Bonds | — | 10,080,693 | — | |||||||||
Corporate Bonds | — | 2,437,805 | — | |||||||||
U.S. Treasury Notes | — | 4,941,504 | — | |||||||||
Preferred Stocks | 1,377,416 | — | — | |||||||||
Short-Term Investments | 5,873,485 | 459,127 | — | |||||||||
Total Investments | $ | 7,250,901 | $ | 317,724,076 | $ | 44,998 | ||||||
Futures Contracts – Long* | $ | 1,654,377 | $ | — | $ | — | ||||||
Futures Contracts – Short* | $ | (947,505 | ) | $ | — | $ | — | |||||
WMC Strategic European Equity Fund | ||||||||||||
Common Stocks: | ||||||||||||
Austria | $ | — | $ | 2,484,373 | $ | — | ||||||
Belgium | — | 15,165,074 | — | |||||||||
Denmark | — | 21,081,815 | — | |||||||||
Finland | — | 12,519,140 | — | |||||||||
France | — | 84,737,070 | — | |||||||||
Germany | 4,810,576 | 73,296,758 | — | |||||||||
Italy | — | 2,506,163 | — | |||||||||
Netherlands | — | 57,944,532 | — | |||||||||
Portugal | — | 7,848,243 | — | |||||||||
Spain | 2,984,768 | 7,279,999 | — | |||||||||
Sweden | — | 75,248,078 | — | |||||||||
Switzerland | — | 82,955,459 | — | |||||||||
United Kingdom | — | 155,166,011 | — | |||||||||
Preferred Stocks | — | 3,963,386 | — | |||||||||
Short-Term Investments | 7,956,454 | — | — | |||||||||
Total Investments | $ | 15,751,798 | $ | 602,196,101 | $ | — |
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Level 1 | Level 2 | Level 3 | ||||||||||
WMC Japan Alpha Opportunities Fund | ||||||||||||
Common Stocks | $ | — | $ | 256,721,994 | $ | — | ||||||
REIT^ | — | 2,086,222 | — | |||||||||
Exchange Traded Funds | — | 954,479 | — | |||||||||
Short-Term Investments | 590 | — | — | |||||||||
Total Investments | $ | 590 | $ | 259,762,695 | $ | — | ||||||
Futures Contracts – Long* | $ | 238,800 | $ | — | $ | — | ||||||
Forward Foreign Currency | ||||||||||||
Exchange Contracts* | $ | — | $ | 234,096 | $ | — | ||||||
Somerset Emerging Markets Fund | ||||||||||||
Common Stocks: | ||||||||||||
Brazil | $ | — | $ | 18,758,926 | $ | — | ||||||
Chile | 3,206,412 | 9,114,428 | — | |||||||||
China | — | 18,603,181 | — | |||||||||
Germany | — | 1,805,097 | — | |||||||||
Greece | — | 4,918,790 | — | |||||||||
Hungary | — | 19,250,496 | — | |||||||||
India | — | 33,728,446 | — | |||||||||
Indonesia | — | 2,432,420 | — | |||||||||
Netherlands | 7,049,588 | — | — | |||||||||
Nigeria | 2,024,096 | — | — | |||||||||
Philippines | — | 562,466 | — | |||||||||
Poland | — | 2,710,815 | — | |||||||||
Russia | 8,263,095 | — | — | |||||||||
South Africa | — | 13,360,124 | — | |||||||||
South Korea | 2,150,323 | 29,356,395 | — | |||||||||
Taiwan | — | 14,918,366 | — | |||||||||
Turkey | — | 4,826,141 | — | |||||||||
United Arab Emirates | — | 9,470,449 | — | |||||||||
United Kingdom | — | 7,067,850 | — | |||||||||
United States | 1,843,264 | — | — | |||||||||
Short-Term Investments | 648 | — | — | |||||||||
Total Investments | $ | 24,537,426 | $ | 190,884,390 | $ | — | ||||||
Beutel Goodman Large-Cap Value Fund | ||||||||||||
Common Stocks | $ | 179,698,736 | $ | — | $ | — | ||||||
Short-Term Investments | 16,086,760 | — | — | |||||||||
Total Investments | $ | 195,785,496 | $ | — | $ | — |
^ | Real Estate Investment Trusts |
* | Amounts presented for Futures Contracts and Forward Foreign Currency Exchange Contracts represent total unrealized appreciation (depreciation) as of December 31, 2018. |
The following is a reconciliation of Level 3 securities for which significant unobservable inputs were used to determine fair value.
Small-Cap Growth Fund | Contingent Value Rights | Private Placements | ||||||
Balance as of June 30, 2018 | $ | 131,192 | $ | 2,450,871 | ||||
Acquisitions / Purchases | — | 3,000 | ||||||
Distributions / Returns of Capital | — | (111,600 | ) | |||||
Realized Gains | — | 106,000 | ||||||
Change in Unrealized Appreciation | 341,572 | 121,443 | ||||||
Dispositions/Sales | (472,764 | ) | — | |||||
Balance as of December 31, 2018 | $ | — | $ | 2,569,714 |
The Contingent Value Rights (“CVR”) were acquired as a result of Dyax Corp. (which was a portfolio holding of the Fund) being acquired by Shire PLC. In exchange for the Fund’s shares in Dyax Corp., the Fund received cash considerations from Shire PLC as well as the CVR. On September 10, 2018, the Fund received $472,674 from Shire PLC in exchange for the CVR. The Fund recognized realized gains of $341,572 in connection with the disposition of the CVR.
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Notes to Financial Statements
December 31, 2018 (Unaudited)
The inputs utilized in valuing the Private Placements 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.
Asset Backed Securities | ||||||||||||||||
Intermediate | Total | Strategic | Mortgage | |||||||||||||
Income Fund | Return Fund | Bond Fund | Securities Fund | |||||||||||||
Balance as of June 30, 2018 | $ | 1,131,822 | $ | 1,153,813 | $ | 871,021 | $ | 2,119,829 | ||||||||
Accrued discounts/premiums | (7,889 | ) | (7,440 | ) | (4,583 | ) | (12,107 | ) | ||||||||
Paydowns | — | — | (7,970 | ) | — | |||||||||||
Realized gain(loss) | (826 | ) | (4,833 | ) | (4,818 | ) | (36,717 | ) | ||||||||
Change in unrealized appreciation (depreciation) | 1,979 | 4,580 | 4,211 | 27,047 | ||||||||||||
Sales | (26,690 | ) | (252,701 | ) | (348,535 | ) | (1,572,961 | ) | ||||||||
Transfers out of Level 3 and into Level 2 | (1,098,396 | ) | (888,837 | ) | (504,744 | ) | (480,093 | ) | ||||||||
Balance as of December 31, 2018 | $ | — | $ | 4,582 | $ | 4,582 | $ | 44,998 | ||||||||
Change in unrealized appreciation (depreciation) | ||||||||||||||||
during the period for level 3 investments held at | ||||||||||||||||
December 31, 2018 | N/A | $ | (26 | ) | $ | (26 | ) | $ | (252 | ) |
These asset backed securities are valued utilizing prices from an independent pricing service that are based upon quotes from a single broker.
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. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Income and capital gains on some foreign securities may be subject to foreign withholding or capital gains taxes. 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.
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
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security, and the proceeds from such sale are decreased by the premium originally paid. Written and purchased options are non-income producing securities.
None of the Funds purchased, sold or wrote any options during the six months ended December 31, 2018.
E. To-Be-Announced Securities – Some of the Funds may invest in to-be-announced securities (“TBAs”). TBAs is a term that is generally used to describe forward-settling mortgage-backed securities. These TBAs are generally issued by U.S. Government Agencies or U.S. Government Sponsored Entities such as Freddie Mac, Fannie Mae and Ginnie Mae. The actual mortgage-backed security that will be delivered to the buyer at the time TBAs trades are entered into is not known, however, the terms of the acceptable pools of loans that will comprise the mortgage-backed security are determined at the time the trade is entered into (coupon rate, maturity, credit quality, etc.). Investment in TBAs will generally increase a Fund’s exposure to interest rate risk and could also expose a Fund to counterparty default risk. In order to mitigate counterparty default risk, the Funds only enter into TBAs with counterparties for which the risk of default is determined to be remote. As a purchaser or seller of TBAs, the Funds will segregate cash or cash equivalents as collateral as required in accordance with applicable regulation.
F. 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, Sustainable 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.
G. 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.
H. 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 (2015-2017) as of June 30, 2018 or are expected to be taken in the Funds’ 2018 tax returns. 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.
I. 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.
J. 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.
K. New Accounting Pronouncements – In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact of applying this provision, which will become effective in the Funds on July 1, 2019.
125
Notes to Financial Statements
December 31, 2018 (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 a management fee, accrued daily and payable monthly, from each Fund at an annual rate of the Fund’s average daily net assets as follows:
Fund | Breakpoint | Annual Fee | Fund | Breakpoint | Annual Fee |
Growth Equity and | First $1.5 billion | 0.60% | Flexible Equity* | First $150 million | 0.50% |
Sustainable Growth* | $1.5 billion to $3 billion | 0.55% | $150 million to $250 million | 0.45% | |
$3 billion to $6 billion | 0.50% | $250 million to $1 billion | 0.40% | ||
Over $6 billion | 0.45% | Over $1 billion | 0.38% |
* | From July 1, 2018 through September 11, 2018, the Adviser voluntarily lowered its management fee by implementing a new management fee breakpoint structure (previously, the management fee was 0.60% of average daily net assets). Effective September 12, 2018, the Adviser contractually lowered its management fee under the same breakpoint structure. |
Fund | Annual Fee | Fund | Annual Fee |
Equity Income | 0.60% | Sustainable Bond | 0.30% |
Mid-Cap Growth | 0.65% | Maryland Bond | 0.30% |
Small-Cap Growth | 0.85% | Tax-Exempt Bond | 0.30% |
Small-Cap Fundamental Value | 0.85% | Mortgage Securities Fund | 0.30% |
Global Leaders1 | 0.65% | WMC Strategic European Equity2 | 0.90% |
Intermediate Income | 0.30% | WMC Japan Alpha Opportunities2 | 1.00% |
Total Return | 0.30% | Somerset Emerging Markets3 | 0.90% |
Strategic Bond | 0.40% | Beutel Goodman Large-Cap Value4 | 0.45% |
1 | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2018, 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. |
2 | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2018, Wellington Management Company LLP (“Wellington”) served as sub-adviser to the WMC Strategic European Equity Fund and the WMC Japan Alpha Opportunities Fund and made investment decisions on their behalf. Wellington is compensated for its services by the Adviser. |
3 | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2018, Somerset Capital Management, LLP (“Somerset”) served as sub-adviser to the Somerset Emerging Markets Fund and made investment decisions on its behalf. Somerset is compensated for its services by the Adviser. See Note 10 for further details. |
4 | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2018, Beutel, Goodman & Company Ltd. (“Beutel Goodman”) served as sub-adviser to the Beutel Goodman Large-Cap Value Fund and made investment decisions on its behalf. Beutel Goodman is compensated for its services by the Adviser. |
These fees are reported on the Funds’ Statements of Operations as “Investment advisory fees”.
Business Management Fees – 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. These fees are reported on the Funds’ Statements of Operations as “Business management fees”.
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 as follows:
Fund(s): | Institutional Shares | Investor Shares | Advisor Shares |
Growth Equity, Flexible Equity, Equity Income and Sustainable Growth | 1.00% | 1.15% | 1.35% |
Mid-Cap Growth and Beutel Goodman Large-Cap Value | 0.70% | 0.85% | 1.10% |
Small-Cap Growth and Small-Cap Fundamental Value | 1.25% | 1.40% | 1.60% |
Global Leaders* | 0.75% | 0.90% | 1.15% |
Intermediate Income, Total Return, | |||
Sustainable Bond, Maryland Bond, Tax-Exempt Bond and Mortgage Securities | 0.55% | 0.60% | 0.80% |
Strategic Bond | 0.65% | 0.70% | 0.95% |
WMC Strategic European Equity and Somerset Emerging Markets | 1.60% | 1.75% | 2.00% |
WMC Japan Alpha Opportunities | 1.70% | 1.85% | 2.10% |
* | Prior to November 1, 2018, the expense caps for the Institutional Shares, Investor Shares, and Advisor Shares of the Global Leaders Fund were 0.70%, 0.85%, and 1.10%, respectively. |
126
Notes to Financial Statements
December 31, 2018 (Unaudited)
During the six months ended December 31, 2018, the Adviser waived $50,255 in expenses for the Mid-Cap Growth Fund and $126,203 in expenses for Global Leaders Fund. The Adviser may recoup any waived amounts from the Funds if such reimbursement does not cause the Funds to exceed its existing expense limitations or the limitation in place at the time the reduction was originally made and the amount recouped is made within three years after the date on which the Adviser waived the expense. The Funds must pay their current ordinary operating expenses before the Adviser is entitled to any recoupment of previously waived fees and/or expenses. The cumulative amounts of previously waived fees that the Adviser may recoup from the Funds are shown below:
June 30, | ||||||||||||||||
2019 | 2020 | 2021 | Total | |||||||||||||
Mid-Cap Growth Fund | N/A | N/A | $ | 59,874 | $ | 59,874 | ||||||||||
Global Leaders Fund | $ | 84,282 | $ | 99,017 | 138,801 | 322,100 | ||||||||||
Sustainable Bond Fund | N/A | N/A | 28,558 | 28,558 |
During the six months ended December 31, 2018, the Adviser has recovered $12,869 of the $28,558 of previously waived fees in the Sustainable Bond Fund.
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. These fees are reported in the Funds’ Statements of Operations as “Distribution Fees – Advisor Shares”.
Shareholder Servicing – 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 Intermediate Income Fund, Total Return Fund, Strategic Bond Fund, Sustainable Bond Fund, Maryland Bond Fund, Tax-Exempt Bond Fund and Mortgage Securities Fund, which may pay a fee of up to 0.05%) for shareholder services provided to the Funds by financial institutions, including the Adviser. These fees are reported in the Funds’ Statements of Operations as “Service Fees – Investor Shares” and “Service Fees – Advisor Shares”.
Investments in Affiliates – Intermediate Income Fund
The Intermediate Income Fund and Mortgage Securities Fund are considered affiliates since Brown Advisory LLC is the Adviser to both of the Funds. In seeking to achieve its investment objective, the Intermediate Income Fund invests a portion of its assets into the Mortgage Securities Fund. As of December 31, 2018, the Intermediate Income Fund owned shares of the Mortgage Securities Fund with a total market value of $26,354,995, or 20.1% 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, 2018, the Intermediate Income Fund waived $36,511 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 Institutional Shares during the six months ended December 31, 2018:
Net | Change In | Unrealized | ||||||
Beginning | Realized | Unrealized | Ending | Appreciation | Capital | |||
Market Value | Purchases | Proceeds | Gains | Appreciation | Market Value | (Depreciation) | Dividend | Gain |
7/01/2018 | at Cost | from Sales | (Losses) | (Depreciation) | 12/31/18 | 12/31/18 | Income | Distributions |
$24,318,345 | $3,000,000 | $1,000,000 | $(58,395) | $95,045 | $26,354,995 | $(1,001,617) | $366,850 | $— |
127
Notes to Financial Statements
December 31, 2018 (Unaudited)
Other Service Providers – U.S. Bancorp Fund Services, LLC (“Fund Services”), doing business as U.S. Bank Global Fund Services, 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. Fund Services also serves as the Funds’ fund accountant and transfer agent. Certain officers of the Trust are employees of Fund Services and the Funds’ custodian, U.S. Bank, N.A., is an affiliate of the Administrator. Fees paid to Fund Services and U.S. Bank, N.A. for its service can be found in the Statements of Operations as “Administration, accounting and transfer agent fees” and “Custodian fees”, respectively. Additional amounts for miscellaneous expenses may be paid by the Funds to Fund Services and included in “Miscellaneous expenses” in the Statements of Operations.
Rule 17a-7 Transactions – Each Fund is permitted to purchase and sell securities to certain affiliated parties under specified conditions outlined in procedures adopted by the Board of Trustees pursuant to Rule 17a-7 under the 1940 Act. Pursuant to these procedures, during the six months ended December 31, 2018, the WMC Japan Alpha Opportunities Fund engaged in securities purchases and sales of $112,981 and $12,665,664, respectively . These transactions are included in the purchases and sales table in Note 4.
Note 4. Purchases and Sales of Securities
The cost of purchases and the proceeds from sales of investments (including maturities), other than short-term investments, during the six months ended December 31, 2018 were as follows:
Fund | Purchases | Sales | Fund | Purchases | Sales | |
Growth Equity | $222,924,260 | $379,405,795 | Strategic Bond | $139,924,336 | $ 114,856,902 | |
Flexible Equity | 39,939,133 | 44,465,633 | Sustainable Bond | 56,194,535 | 15,051,114 | |
Equity Income | 8,036,431 | 16,266,118 | Maryland Bond | 37,027,832 | 36,732,200 | |
Sustainable Growth | 210,672,846 | 111,058,379 | Tax-Exempt Bond | 414,548,384 | 219,350,923 | |
Mid-Cap Growth | 14,729,115 | 7,124,675 | Mortgage Securities | 455,125,313 | 508,120,437 | |
Small-Cap Growth | 234,324,902 | 225,445,771 | WMC Strategic European Equity | 116,100,082 | 332,230,238 | |
Small-Cap Fundamental Value | 283,423,882 | 372,862,666 | WMC Japan Alpha Opportunities | 176,492,526 | 1,222,929,373 | |
Global Leaders | 76,373,038 | 19,859,613 | Somerset Emerging Markets | 47,419,692 | 327,983,435 | |
Intermediate Income | 57,360,915 | 52,902,697 | Beutel Goodman Large-Cap Value | 115,522,753 | 68,245,475 | |
Total Return | 150,229,472 | 96,293,470 |
The Intermediate Income Fund purchased $16,157,475 and sold $19,477,839 in U.S. Government securities during the six months ended December 31, 2018. The Total Return Fund purchased $8,963,500 in U.S. Government Securities during the six months ended December 31, 2018. The Sustainable Bond Fund purchased $12,482,678 and sold $6,912,246 in U.S. Government Securities during the six months ended December 31, 2018. The Mortgage Securities Fund purchased $4,938,865 in U.S. Government Securities during the six months ended December 31, 2018. Purchases and sales of U.S. Government securities are included in the totals above and include U.S. Treasury Bonds and Notes.
128
Notes to Financial Statements
December 31, 2018 (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 during the six months ended December 31, 2018 is estimated):
Tax Exempt Income | Ordinary Income | Long-Term Capital Gain^ | ||||||||||||||||||||||
December 31, | June 30, | December 31, | June 30, | December 31, | June 30, | |||||||||||||||||||
Fund | 2018 | 2018 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||||
Growth Equity | $ | — | $ | — | $ | — | $ | — | $ | 202,855,906 | $ | 144,114,162 | ||||||||||||
Flexible Equity | — | — | 2,104,882 | 2,075,622 | 14,658,366 | — | ||||||||||||||||||
Equity Income | — | — | 1,074,359 | 2,012,078 | 9,837,503 | 3,329,274 | ||||||||||||||||||
Sustainable Growth | — | — | 1,432,708 | — | 24,715,806 | 8,367,895 | ||||||||||||||||||
Mid-Cap Growth | — | — | 280,109 | — | — | — | ||||||||||||||||||
Small-Cap Growth | — | — | 11,630,631 | 2,657,312 | 28,238,707 | 10,276,150 | ||||||||||||||||||
Small-Cap Fundamental Value | — | — | 20,916,108 | 19,877,192 | 112,248,608 | 32,961,277 | ||||||||||||||||||
Global Leaders | — | — | 347,102 | 43,629 | — | — | ||||||||||||||||||
Intermediate Income | — | — | 1,538,070 | 3,011,904 | — | — | ||||||||||||||||||
Total Return | — | — | 2,471,446 | 3,327,124 | — | — | ||||||||||||||||||
Strategic Bond | — | — | 2,971,724 | 3,760,050 | — | — | ||||||||||||||||||
Sustainable Bond | — | — | 1,143,939 | 607,063 | — | — | ||||||||||||||||||
Maryland Bond | 2,374,551 | 4,411,293 | — | 48,858 | — | — | ||||||||||||||||||
Tax-Exempt Bond | 8,759,049 | 9,857,181 | — | 232,534 | — | — | ||||||||||||||||||
Mortgage Securities | — | — | 4,447,451 | 7,967,974 | — | — | ||||||||||||||||||
WMC Strategic European Equity | — | — | 13,352,789 | 11,692,696 | 63,683,371 | — | ||||||||||||||||||
WMC Japan Alpha Opportunities | — | — | 63,963,073 | — | 54,218,893 | 89,959,697 | ||||||||||||||||||
Somerset Emerging Markets | — | — | 9,238,919 | 6,156,538 | — | — | ||||||||||||||||||
Beutel Goodman Large-Cap Value | — | — | 4,272,002 | — | — | — |
^ Designated as a long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3).
At June 30, 2018, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
Growth | Flexible | Equity | Sustainable | Mid-Cap | Small-Cap | |||||||||||||||||||
Equity | Equity | Income | Growth | Growth | Growth | |||||||||||||||||||
Fund | Fund | Fund | Fund | Fund | Fund | |||||||||||||||||||
Cost of investments | $ | 1,150,097,532 | $ | 265,218,577 | $ | 60,742,672 | $ | 478,946,275 | $ | 19,913,983 | $ | 681,257,570 | ||||||||||||
Unrealized appreciation | 918,018,420 | 193,835,673 | 35,603,534 | 211,409,511 | 1,736,453 | 253,847,435 | ||||||||||||||||||
Unrealized depreciation | (4,324,089 | ) | (5,174,252 | ) | (329,748 | ) | (5,747,572 | ) | (281,807 | ) | (15,129,822 | ) | ||||||||||||
Net unrealized app (dep) | 913,694,331 | 188,661,421 | 35,273,786 | 205,661,939 | 1,454,646 | 238,717,613 | ||||||||||||||||||
Undistributed income | — | 1,405,219 | 328,341 | 1,432,439 | 76,762 | 3,777,600 | ||||||||||||||||||
Undistributed capital gains | 136,184,879 | 9,891,351 | 9,048,594 | 24,715,654 | — | — | ||||||||||||||||||
Total distributable earnings | 136,184,879 | 11,296,570 | 9,376,935 | 26,148,093 | 76,762 | 3,777,600 | ||||||||||||||||||
Other accumulated losses | (4,270,996 | ) | 222 | — | — | — | (840,387 | ) | ||||||||||||||||
Total earnings (losses) | $ | 1,045,608,214 | $ | 199,958,213 | $ | 44,650,721 | $ | 231,810,032 | $ | 1,531,408 | $ | 241,654,826 | ||||||||||||
Small-Cap | Global | Intermediate | Total | Strategic | Sustainable | |||||||||||||||||||
Fundamental | Leaders | Income | Return | Bond | Bond | |||||||||||||||||||
Value Fund | Fund | Fund | Fund | Fund | Fund | |||||||||||||||||||
Cost of investments | $ | 986,432,337 | $ | 72,147,010 | $ | 131,157,197 | $ | 135,197,764 | $ | 161,424,628 | $ | 55,385,214 | ||||||||||||
Unrealized appreciation | 344,442,294 | 16,037,076 | 233,181 | 634,339 | 743,999 | 139,369 | ||||||||||||||||||
Unrealized depreciation | (18,379,456 | ) | (1,436,833 | ) | (3,279,718 | ) | (2,314,733 | ) | (1,739,167 | ) | (891,422 | ) | ||||||||||||
Net unrealized app (dep) | 326,062,838 | 14,600,243 | (3,046,537 | ) | (1,680,394 | ) | (995,168 | ) | (752,053 | ) | ||||||||||||||
Undistributed income | 7,897,792 | 347,066 | 22,188 | 249,520 | 285,728 | 105,572 | ||||||||||||||||||
Undistributed capital gains | 62,783,723 | — | — | — | — | — | ||||||||||||||||||
Total distributable earnings | 70,681,515 | 347,066 | 22,188 | 249,520 | 285,728 | 105,572 | ||||||||||||||||||
Other accumulated losses | — | (679,061 | ) | (825,957 | ) | (1,538,301 | ) | (3,394,838 | ) | (202,550 | ) | |||||||||||||
Total earnings (losses) | $ | 396,744,353 | $ | 14,268,248 | $ | (3,850,306 | ) | $ | (2,969,175 | ) | $ | (4,104,278 | ) | $ | (849,031 | ) |
129
Notes to Financial Statements
December 31, 2018 (Unaudited)
WMC Japan | ||||||||||||||||||||||||
Maryland | Mortgage | WMC Strategic | Alpha | Somerset | ||||||||||||||||||||
Bond | Tax-Exempt | Securities | European | Opportunities | Emerging | |||||||||||||||||||
Fund | Bond Fund | Fund | Equity Fund | Fund | Markets Fund | |||||||||||||||||||
Cost of investments | $ | 179,602,523 | $ | 433,526,187 | $ | 384,611,549 | $ | 795,515,265 | $ | 1,458,225,394 | $ | 470,147,304 | ||||||||||||
Gross unrealized appreciation | 1,722,711 | 3,445,770 | 1,621,523 | 181,562,131 | 171,222,018 | 123,762,857 | ||||||||||||||||||
Gross unrealized depreciation | (2,273,298 | ) | (3,773,467 | ) | (5,520,271 | ) | (30,975,896 | ) | (142,655,773 | ) | (44,740,965 | ) | ||||||||||||
Net unrealized app (dep) | (550,587 | ) | (327,697 | ) | (3,898,748 | ) | 150,586,235 | 28,566,245 | 79,021,892 | |||||||||||||||
Undistributed income | 268,938 | ^ | 856,020 | ^ | 638,829 | 13,352,323 | 63,962,954 | 7,814,031 | ||||||||||||||||
Undistributed capital gains | — | — | — | 35,919,208 | 54,218,641 | — | ||||||||||||||||||
Total distributable earnings | 268,938 | ^ | 856,020^ | 638,829 | 49,271,531 | 118,181,595 | 7,814,031 | |||||||||||||||||
Other accumulated losses | (885,034 | ) | (4,493,981 | ) | (12,763,292 | ) | 13,046 | (1,058,776 | ) | (51,992,042 | ) | |||||||||||||
Total earnings (losses) | $ | (1,166,683 | ) | $ | (3,965,658 | ) | $ | (16,023,211 | ) | $ | 199,870,812 | $ | 145,689,064 | $ | 34,843,881 | |||||||||
Beutel | ||||||||||||||||||||||||
Goodman | ||||||||||||||||||||||||
Large-Cap | ||||||||||||||||||||||||
Value Fund | ||||||||||||||||||||||||
Cost of investments | $ | 152,354,695 | ||||||||||||||||||||||
Gross unrealized appreciation | 2,746,156 | |||||||||||||||||||||||
Gross unrealized depreciation | (7,072,044 | ) | ||||||||||||||||||||||
Net unrealized app (dep) | (4,325,888 | ) | ||||||||||||||||||||||
Undistributed income | 664,783 | |||||||||||||||||||||||
Undistributed capital gains | — | |||||||||||||||||||||||
Total distributable earnings | 664,783 | |||||||||||||||||||||||
Other accumulated losses | (109 | ) | ||||||||||||||||||||||
Total earnings (losses) | $ | (3,661,214 | ) |
^ Represents tax exempt income
Note 6. Futures Contracts
The Total Return Fund, Strategic Bond Fund, Sustainable Bond Fund, Mortgage Securities Fund, and WMC Japan Alpha Opportunities Fund invested in futures contracts during the six months ended December 31, 2018. 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. This collateral may consist of cash, foreign currency and / or securities (generally U.S. Treasury Bills). Such cash and foreign currency amounts are included on the Statements of Assets and Liabilities as “Cash deposit at broker – futures contracts” or “Cash deficit at broker – futures contracts” (a deficit balance is not indicative of any amount due to the broker, as such amounts are offset in full and meet collateralization requirements from the Funds’ pledging of securities). Securities pledged as collateral are included on the Statements of Assets and Liabilities as part of “Total investments, at market value”. These securities are tickmarked on the Schedules of Investments as being pledged in connection with open futures contracts. At December 31, 2018, the Funds had the following collateral balances with their brokers in connection with their futures accounts:
Securities | Total Collateral | |||||||||||||||
Fund | Cash | Foreign Currency | Pledged | at Broker | ||||||||||||
Total Return | $ | (18,591 | ) | $ | — | $ | 608,842 | $ | 590,251 | |||||||
Strategic Bond | 97,760 | — | — | 97,760 | ||||||||||||
Sustainable Bond | 124,236 | — | — | 124,236 | ||||||||||||
Mortgage Securities | 23,880 | — | 399,237 | 423,117 | ||||||||||||
WMC Japan Alpha Opportunities | 3,065,051 | (2,378,882 | ) | — | 686,169 |
Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the fluctuation in the value of the contract. These daily fluctuations are known as variation margin and are recorded by the Fund as unrealized gains or losses on futures contracts. When these futures contracts are closed, realized gains or losses on futures contracts are recorded by the
130
Notes to Financial Statements
December 31, 2018 (Unaudited)
Fund. The realized gains or losses are reported in the Statement of Operations as net realized gains or losses from futures contracts. Depending upon the agreement with the broker, the Funds may or may not settle variation margin daily. The Funds attempt to mitigate counterparty credit risk by only entering into futures contracts with brokers that the Funds believe have the financial resources to honor their obligations and by monitoring the financial stability of these brokers. The “Notional Amount” of futures contracts shown on the Schedule of Investments represents the notional market value of the futures contracts on the day they were opened. The “Notional Value” of futures contracts shown on the Schedule of Investments represents the notional market value of the futures contracts as of the date of this report. For long futures contracts, an excess of Notional Value over Notional Amount results in unrealized appreciation on the futures contract (and an excess of Notional Amount over Notional Value results in unrealized depreciation on the futures contract). The opposite is true for short futures contracts. For futures contracts denominated in foreign currencies, both the Notional Amount and Notional Value have been translated into U.S. Dollars as of the date of this report. These unrealized appreciation (depreciation) amounts represent the net impact on a Fund’s net assets as a result of open futures contracts as of the date of this report. The use of long futures contracts by the Funds subjects them to a risk of loss in excess of the gross unrealized appreciation and/or gross unrealized depreciation amounts shown on the Statements of Assets and Liabilities and up to the total Notional Amount of the futures contract as shown on the Schedule of Investments. The use of short futures contracts by the Funds subjects them to a risk of loss in excess of the gross unrealized appreciation and/or gross unrealized depreciation 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 contracts as shown on the Schedules of Investments. The impact of futures contracts, not accounted for as hedging instruments, was as follows:
Statements of Assets and Liabilities | Statements of Operations for the | |||||||||||||||
as of December 31, 2018 | period ended December 31, 2018 | |||||||||||||||
Net Change | ||||||||||||||||
in Unrealized | ||||||||||||||||
Gross Unrealized | Gross Unrealized | Net Realized | Appreciation | |||||||||||||
Appreciation – | Depreciation – | Gain (Loss) – | (Deprecation) – | |||||||||||||
Fund | Futures Contracts | Futures Contracts | Futures Contracts | Futures Contracts | ||||||||||||
Total Return | $ | 1,641,076 | $ | 156,239 | $ | (620,146 | ) | $ | 993,954 | |||||||
Strategic Bond | — | — | (38,160 | ) | 70,497 | |||||||||||
Sustainable Bond | 422,666 | 369,144 | (112,311 | ) | 63,306 | |||||||||||
Mortgage Securities | 1,654,377 | 947,505 | (200,603 | ) | 71,116 | |||||||||||
WMC Japan Alpha Opportunities | 238,800 | — | 751,006 | 1,286,878 |
During the six months ended December 31, 2018, the average Notional Value of long futures contracts held by the Total Return Fund, Sustainable Bond Fund, Mortgage Securities Fund, and WMC Japan Alpha Opportunities Fund were $27,300,753, $5,081,171, $39,447,282, and $37,545,813, respectively. The Total Return Fund, Sustainable Bond Fund and Mortgage Securities Fund were invested in long U.S. Treasury futures contracts, which gave the funds exposure to interest rate risk. The WMC Japan Alpha Opportunities Fund was invested in long stock index futures contracts, which were denominated in foreign currencies, and which gave the Fund exposure to both foreign equity risk and foreign currency risk.
During the six months ended December 31, 2018, the average Notional Value of the short futures contracts held by the Total Return Fund, Strategic Bond Fund, Sustainable Bond Fund and the Mortgage Securities Fund were $7,907,502, $6,188,170, $9,994,253 and $80,104,383, respectively. The Total Return Fund, Strategic Bond Fund, Sustainable Bond Fund and Mortgage Securities Fund were invested in short U.S. Treasury futures contracts, which served to hedge or reduce the funds exposure to interest rate risk. The Funds activity in futures contracts, and the resulting assets or liabilities, were not subject to any arrangements wherein these assets or liabilities were, or could have been, settled on a net basis with any other derivative related obligations.
Note 7. Forward Foreign Currency Contracts
The WMC Japan Alpha Opportunities Fund held forward foreign currency contracts during the six months ended December 31, 2018.
A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at an agreed upon price. 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
131
Notes to Financial Statements
December 31, 2018 (Unaudited)
realized gains or losses are reported in the Statement of Operations as net realized gains or losses from forward foreign currency contracts. “Gross unrealized appreciation – forward foreign currency contracts” and “gross unrealized depreciation – forward foreign currency contracts” are reported on 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 (depreciation) 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, not accounted for as hedging instruments, was as follows:
Statements of Assets and Liabilities | Statements of Operations for the | |||||||||||||
as of December 31, 2018 | period ended December 31, 2018 | |||||||||||||
Net Change | ||||||||||||||
in Unrealized | ||||||||||||||
Gross Unrealized | Gross Unrealized | Net Realized | Appreciation | |||||||||||
Appreciation – | Depreciation – | Gain (Loss) – | (Deprecation) – | |||||||||||
Forward Foreign | Forward Foreign | Forward Foreign | Forward Foreign | |||||||||||
Fund | Currency Contracts | Currency Contracts | Currency Contracts | Currency Contracts | ||||||||||
WMC Japan Alpha Opportunities | $ | 234,096 | $ | — | $ | (1,221,617 | ) | $618,277 |
During the six months ended December 31, 2018, the average net exposure, in U.S. Dollars, of forward foreign currency contracts held by the WMC Japan Alpha Opportunities Fund was $(23,534,661). The WMC Japan Alpha Opportunities Fund was, on a net basis, long, or buying the Japanese Yen, while it was short, or selling, the U.S. Dollar. The Fund’s use of forward foreign currency contracts, and the resulting assets or liabilities, were not subject to any arrangements wherein these assets or liabilities were, or could have been, settled on a net basis with any other derivative related obligations.
Note 8. Line of Credit
As of December 31, 2018, 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, 2018 was 5.50% (prime rate). The following table shows the details of the Funds’ borrowing activity during the six months ended December 31, 2018. Funds that are not listed did not utilize the line of credit during the period.
Maximum | Total Interest | Average | ||
Outstanding | Average Daily | Expense | Annual | |
Fund | Balance | Balance | Incurred | Interest Rate |
Mid-Cap Growth | $ 864,000 | $ 8,440 | $ 220 | 5.11% |
Maryland Bond | 303,000 | 4,940 | 133 | 5.25% |
WMC Strategic European Equity | 37,056,000 | 682,636 | 17,540 | 5.03% |
WMC Japan Alpha Opportunities | 2,168,000 | 15,533 | 432 | 5.44% |
Somerset Emerging Markets | 27,453,000 | 1,052,614 | 28,275 | 5.26% |
Beutel Goodman Large-Cap Value | 11,083,000 | 180,701 | 5,080 | 5.50% |
As of December 31, 2018, the WMC Japan Alpha Opportunities Fund and Somerset Emerging Markets Fund had outstanding borrowings of $2,168,000 and $12,023,000, respectively, under the line of credit.
132
Notes to Financial Statements
December 31, 2018 (Unaudited)
Note 9. SEC Disclosure Update and Simplification Release
The SEC Disclosure Update and Simplification Release has prescribed that distributions presented in the Statements of Changes in Net Assets will no longer be presented separately as from net investment income and net realized gain and will instead be shown only in total (except for distributions deemed to be a return of capital). For reference, prior year distributions which are no longer presented separately on the Statements of Changes in Net Assets as from net investment income and net realized gain were categorized as follows:
Fiscal Year Ended June 30, 2018 | ||||||||||||||||||||||||
Net Investment Income | Net Realized Gain | |||||||||||||||||||||||
Institutional | Investor | Advisor | Institutional | Investor | Advisor | |||||||||||||||||||
Fund | Shares | Shares | Shares | Shares | Shares | Shares | ||||||||||||||||||
Growth Equity | — | — | — | 23,141,509 | 120,503,157 | 469,496 | ||||||||||||||||||
Flexible Equity | 643,925 | 1,422,429 | 9,268 | — | — | — | ||||||||||||||||||
Equity Income | 512,185 | 1,236,776 | 24,423 | 916,839 | 2,572,585 | 78,544 | ||||||||||||||||||
Sustainable Growth | — | — | — | 4,421,769 | 802,354 | 3,143,772 | ||||||||||||||||||
Mid-Cap Growth | — | — | — | — | — | — | ||||||||||||||||||
Small-Cap Growth | 1,427,349 | 1,204,104 | 25,859 | 4,901,077 | 5,113,684 | 261,389 | ||||||||||||||||||
Small-Cap Fundamental Value | 2,681,377 | 4,805,086 | 62,036 | 13,597,047 | 30,834,877 | 858,046 | ||||||||||||||||||
Global Leaders | — | 43,629 | — | — | — | — | ||||||||||||||||||
Intermediate Income | — | 2,930,957 | 80,947 | — | — | — | ||||||||||||||||||
Total Return | 3,247,038 | 80,086 | — | — | — | — | ||||||||||||||||||
Strategic Bond | 3,754,542 | 5,508 | — | — | — | — | ||||||||||||||||||
Sustainable Bond | — | 607,063 | — | — | — | — | ||||||||||||||||||
Maryland Bond | — | 4,460,151 | — | — | — | — | ||||||||||||||||||
Tax-Exempt Bond | — | 10,089,715 | — | — | — | — | ||||||||||||||||||
Mortgage Securities | 7,958,014 | 9,960 | — | — | — | — | ||||||||||||||||||
WMC Strategic European Equity | 11,440,046 | 101,939 | 150,711 | — | — | — | ||||||||||||||||||
WMC Japan Alpha Opportunities | — | — | — | 89,654,329 | 275,411 | 29,957 | ||||||||||||||||||
Somerset Emerging Markets | 4,634,486 | 1,520,480 | 1,572 | — | — | — | ||||||||||||||||||
Beutel Goodman Large-Cap Value | — | — | — | — | — | — |
Note 10. Subsequent Events
WMC Japan Alpha Opportunities Fund – On January 15, 2019, the Board of Trustees (the “Board”) of Brown Advisory Funds, based upon the recommendation of the Adviser, determined to close and liquidate the Brown Advisory – WMC Japan Alpha Opportunities Fund (the “Fund”). The Board concluded that it would be in the best interests of the Fund and its shareholders that the Fund be closed and liquidated as of the close of business on February 22, 2019. The Fund liquidated on February 22, 2019 and is no longer operating or available for purchase.
Somerset Emerging Markets Fund – On February 20, 2019, the Board approved the appointment of Wellington Management Company and Pzena Investment Management, LLC as investment sub-advisers to the Brown Advisory – Somerset Emerging Markets Fund (the “Fund”), effective as of the close of business on February 22, 2019 (the “Effective Date”). As of the Effective Date, Somerset Capital Management LLP was terminated as the sub-adviser to the Fund. Also as of the Effective Date, the Fund has been renamed the Brown Advisory Emerging Markets Select Fund.
In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition through the date the financial statements were issued. No other material events or transactions occurred subsequent to December 31, 2018 that would require recognition or disclosure in these financial statements.
133
Expense Example For the Six Months Ended December 31, 2018 (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, 2018 – December 31, 2018).
Actual Expenses
The Actual Expenses columns 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. 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 Expenses columns 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.
Actual Expenses | Hypothetical Expenses | ||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | ||
Account Value | Account Value | Paid During | Account Value | Paid During | Net Expense | ||
July 1, 2018 | December 31, 2018 | the Period* | December 31, 2018 | the Period* | Ratio* | ||
Growth Equity Fund | |||||||
Institutional Shares | $1,000.00 | $ 923.20 | $3.39 | $1,021.68 | $3.57 | 0.70% | |
Investor Shares | $1,000.00 | $ 922.00 | $4.12 | $1,020.92 | $4.33 | 0.85% | |
Advisor Shares | $1,000.00 | $ 921.10 | $5.33 | $1,019.66 | $5.60 | 1.10% | |
Flexible Equity Fund | |||||||
Institutional Shares | $1,000.00 | $ 909.30 | $2.74 | $1,022.33 | $2.91 | 0.57% | |
Investor Shares | $1,000.00 | $ 908.50 | $3.46 | $1,021.58 | $3.67 | 0.72% | |
Advisor Shares | $1,000.00 | $ 907.00 | $4.66 | $1,020.32 | $4.94 | 0.97% |
134
Expense Example For the Six Months Ended December 31, 2018 (Unaudited)
Actual Expenses | Hypothetical Expenses | ||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | ||
Account Value | Account Value | Paid During | Account Value | Paid During | Net Expense | ||
July 1, 2018 | December 31, 2018 | the Period* | December 31, 2018 | the Period* | Ratio* | ||
Equity Income Fund | |||||||
Institutional Shares | $1,000.00 | $ 947.30 | $3.88 | $1,021.22 | $4.02 | 0.79% | |
Investor Shares | $1,000.00 | $ 947.30 | $4.61 | $1,020.47 | $4.79 | 0.94% | |
Advisor Shares | $1,000.00 | $ 945.30 | $5.83 | $1,019.21 | $6.06 | 1.19% | |
Sustainable Growth Fund | |||||||
Institutional Shares | $1,000.00 | $ 947.40 | $3.53 | $1,021.58 | $3.67 | 0.72% | |
Investor Shares | $1,000.00 | $ 946.40 | $4.27 | $1,020.82 | $4.43 | 0.87% | |
Advisor Shares | $1,000.00 | $ 945.60 | $5.49 | $1,019.56 | $5.70 | 1.12% | |
Mid-Cap Growth Fund | |||||||
Institutional Shares1 | $1,000.00 | $ 885.50 | $3.29 | $1,021.68 | $3.57 | 0.70% | |
Investor Shares | $1,000.00 | $ 889.30 | $4.05 | $1,020.92 | $4.33 | 0.85% | |
Small-Cap Growth Fund | |||||||
Institutional Shares | $1,000.00 | $ 873.40 | $4.63 | $1,020.27 | $4.99 | 0.98% | |
Investor Shares | $1,000.00 | $ 873.10 | $5.33 | $1,019.51 | $5.75 | 1.13% | |
Advisor Shares | $1,000.00 | $ 871.60 | $6.51 | $1,018.25 | $7.02 | 1.38% | |
Small-Cap Fundamental Value Fund | |||||||
Institutional Shares | $1,000.00 | $ 847.50 | $4.47 | $1,020.37 | $4.89 | 0.96% | |
Investor Shares | $1,000.00 | $ 846.90 | $5.17 | $1,019.61 | $5.65 | 1.11% | |
Advisor Shares | $1,000.00 | $ 846.00 | $6.33 | $1,018.35 | $6.92 | 1.36% | |
Global Leaders Fund | |||||||
Institutional Shares2 | $1,000.00 | $ 967.50 | $1.23 | $1,021.42 | $3.82 | 0.75% | |
Investor Shares | $1,000.00 | $ 919.20 | $4.11 | $1,020.92 | $4.33 | 0.85% | |
Intermediate Income Fund | |||||||
Investor Shares | $1,000.00 | $1,012.20 | $2.38 | $1,022.84 | $2.40 | 0.47% | |
Advisor Shares | $1,000.00 | $1,011.20 | $3.65 | $1,021.58 | $3.67 | 0.72% | |
Total Return Fund | |||||||
Institutional Shares | $1,000.00 | $1,008.00 | $2.48 | $1,022.74 | $2.50 | 0.49% | |
Investor Shares | $1,000.00 | $1,007.80 | $2.73 | $1,022.48 | $2.75 | 0.54% | |
Strategic Bond Fund | |||||||
Institutional Shares | $1,000.00 | $1,002.00 | $2.98 | $1,022.23 | $3.01 | 0.59% | |
Investor Shares | $1,000.00 | $1,001.70 | $3.23 | $1,021.98 | $3.26 | 0.64% | |
Sustainable Bond Fund | |||||||
Institutional Shares1 | $1,000.00 | $1,009.70 | $2.76 | $1,022.43 | $2.80 | 0.55% | |
Investor Shares | $1,000.00 | $1,009.50 | $3.04 | $1,022.18 | $3.06 | 0.60% | |
Maryland Bond Fund | |||||||
Investor Shares | $1,000.00 | $1,011.30 | $2.48 | $1,022.74 | $2.50 | 0.49% | |
Tax-Exempt Bond Fund | |||||||
Institutional Shares1 | $1,000.00 | $1,014.60 | $2.16 | $1,023.04 | $2.19 | 0.43% | |
Investor Shares | $1,000.00 | $1,013.60 | $2.44 | $1,022.79 | $2.45 | 0.48% | |
Mortgage Securities Fund | |||||||
Institutional Shares | $1,000.00 | $1,016.30 | $2.39 | $1,022.84 | $2.40 | 0.47% | |
Investor Shares | $1,000.00 | $1,015.00 | $2.64 | $1,022.58 | $2.65 | 0.52% | |
WMC Strategic European Equity Fund | |||||||
Institutional Shares | $1,000.00 | $ 868.20 | $5.13 | $1,019.71 | $5.55 | 1.09% | |
Investor Shares | $1,000.00 | $ 867.40 | $5.84 | $1,018.95 | $6.31 | 1.24% | |
Advisor Shares | $1,000.00 | $ 866.70 | $7.01 | $1,017.69 | $7.58 | 1.49% |
135
Expense Example For the Six Months Ended December 31, 2018 (Unaudited)
Actual Expenses | Hypothetical Expenses | ||||||
Beginning | Ending | Expenses | Ending | Expenses | Annualized | ||
Account Value | Account Value | Paid During | Account Value | Paid During | Net Expense | ||
July 1, 2018 | December 31, 2018 | the Period* | December 31, 2018 | the Period* | Ratio* | ||
WMC Japan Alpha Opportunities Fund | |||||||
Institutional Shares | $1,000.00 | $ 840.50 | $5.66 | $1,019.06 | $6.21 | 1.22% | |
Investor Shares | $1,000.00 | $ 840.50 | $6.36 | $1,018.30 | $6.97 | 1.37% | |
Advisor Shares | $1,000.00 | $ 839.30 | $7.51 | $1,017.04 | $8.24 | 1.62% | |
Somerset Emerging Markets Fund | |||||||
Institutional Shares | $1,000.00 | $ 890.00 | $5.91 | $1,018.95 | $6.31 | 1.24% | |
Investor Shares | $1,000.00 | $ 889.20 | $6.62 | $1,018.20 | $7.07 | 1.39% | |
Advisor Shares | $1,000.00 | $ 888.40 | $7.81 | $1,016.94 | $8.34 | 1.64% | |
Beutel Goodman Large-Cap Value Fund | |||||||
Institutional Shares | $1,000.00 | $ 962.60 | $2.97 | $1,022.18 | $3.06 | 0.60% |
* | 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 (184) in the most recent six-month period divided by the number of days in the Funds’ fiscal year (365). |
1 | Actual expenses information is presented for the period from share class inception end of day July 2, 2018 to December 31, 2018 (182 days). |
2 | Actual expenses information is presented for the period from share class inception end of day October 31, 2018 to December 31, 2018 (61 days). |
136
Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds and (ii) the Continuation of the Sub-Investment Advisory Agreements for the Applicable Sub-Advised Funds
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: (i) 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 (ii) 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 each of the subject Sub-Advisory Agreements, and it is the duty of the Adviser, and each of the Sub-Advisers, as applicable, to furnish the Trustees with such information that is responsive to their request.
Set forth below is information regarding the Board’s most recent consideration of the approval of the continuation of the Investment Advisory Agreement and each of the Sub-Advisory Agreements (other than the Sub-Advisory Agreement for the Brown Advisory – Beutel Goodman Large-Cap Value Fund which was not subject to renewal at this time). The first section provides information regarding the Board’s review of matters with respect to the continuation of the Investment Advisory Agreement with Brown Advisory. In addition, set forth immediately following that section are separate discussions of the Board’s consideration of matters with respect to: (1) the approval of the continuation of the Sub-Investment Advisory Agreement with respect to the Brown Advisory – Somerset Emerging Markets Fund; (2) the approval of the 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 continuation of the Sub-Investment Advisory Agreement with respect to the Brown Advisory Global Leaders Fund.
1. Board of Trustees Approval of the Continuation of the Investment Advisory Agreement for the Funds
In determining whether to approve the continuation of the Investment Advisory Agreement with respect to the applicable Funds, the Trustees requested, and Brown Advisory provided, information and data relevant to the Board’s consideration. This included materials prepared by Brown Advisory 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 11, 2018. 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, 2019.
Following their review and consideration, the Trustees determined that the continuation of the Investment Advisory Agreement with respect to each of the subject 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.
137
Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds and (ii) the Continuation of the Sub-Investment Advisory Agreements for the Applicable Sub-Advised Funds
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, 2018, and for shorter periods as applicable with respect to those Funds with shorter operating histories. 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:
1. Equity Income Fund
The Board first reviewed information and materials regarding the performance results for the Equity Income Fund, noting that the Institutional Shares of the Fund had underperformed its primary benchmark index, the S&P 500 Index, for the one-, three-, and five-year periods ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had underperformed its peer group median for the one-, three-, and five-year periods ended June 30, 2018. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
2. Flexible Equity Fund
The Board next reviewed information and materials regarding the performance results for the Flexible Equity Fund, noting that the Institutional Shares of the Fund had outperformed its primary benchmark index, the S&P 500 Index, for the one-, three-, and ten-year periods ended June 30, 2018, but had underperformed its primary benchmark index, the S&P 500 Index, for the five-year period ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-, three- and ten-year periods ended June 30, 2018, but had underperformed its peer group median for the five-year period ended June 30, 2018.
3. Growth Equity Fund
The Board then reviewed information and materials regarding the performance results for the Growth Equity Fund, noting that the Institutional Shares of the Fund had underperformed its primary benchmark index, the Russell 1000 Growth Index, for the three- and five-year periods ended June 30, 2018, but had outperformed its benchmark index for the one- and ten-year periods ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-, three- and ten-year periods ended June 30, 2018, but had underperformed its peer group median for the five-year period ended June 30, 2018.
4. Small-Cap Fundamental Value Fund
The Board next reviewed information and materials regarding the performance results for the Small-Cap Fundamental Value Fund, noting that the Institutional Shares of the Fund had underperformed its primary benchmark index, the Russell 2000 Value Index, for the one- and three-year periods ended June 30, 2018, but had outperformed its primary benchmark index for the five-year period ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the three- and five-year periods ended June 30, 2018, but had underperformed its peer group median for the one-year period ended June 30, 2018.
5. Small-Cap Growth Fund
The Board then reviewed information and materials regarding the performance results for the Small-Cap Growth Fund, noting that the Institutional Shares of the Fund had underperformed its primary benchmark index, the Russell 2000 Growth Index, for the one-, five- and ten-year periods ended June 30, 2018, but had outperformed its primary benchmark index for the three-year period ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the three-, five-, and ten-year periods ended June 30, 2018, but had underperformed its peer group median for the one-year period ended June 30, 2018.
6. Sustainable Growth Fund
The Board next reviewed information and materials regarding the performance results for the Sustainable Growth Fund, noting that the Institutional Shares of the Fund had outperformed its primary benchmark index, the Russell 1000 Growth Index, for the one-, three- and five-year periods ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-, three- and five-year periods ended June 30, 2018.
7. 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 outperformed its primary benchmark index, the Bloomberg Barclays Intermediate US Aggregate Bond Index, for the one- and three-year periods ended June 30, 2018, but had underperformed its primary benchmark index for the five- and ten-year periods ended June 30, 2018. The Board noted that the Investor Shares of the Fund had
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underperformed its peer group median for the one-, three-, five-, and ten-year periods ended June 30, 2018. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
8. 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 outperformed its primary benchmark index, the Bloomberg Barclays 1-10 Year Blended Municipal Bond Index, for the one- and three-year periods ended June 30, 2018, but had underperformed its primary benchmark index for the five- and ten-year periods ended June 30, 2018. 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, 2018, but had underperformed its peer group median for the five- and ten-year periods ended June 30, 2018. The members of the Board considered and discussed the factors contributing to the Fund’s longer term underperformance and they reviewed them with the Adviser.
9. Strategic Bond Fund
The Board then reviewed information and materials regarding the performance results for the Strategic Bond Fund, noting that the Institutional Shares of the Fund had outperformed its primary benchmark index, the Bloomberg Barclays Intermediate US Aggregate Bond Index, for the one- and three-year periods ended June 30, 2018, but had underperformed its primary benchmark index for the five-year period ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one- and three-year periods ended June 30, 2018, and had performed in line with its peer group median for the five-year period ended June 30, 2018.
10. 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 outperformed its primary benchmark index, the Bloomberg Barclays 1-10 Year Blended Municipal Bond Index, for the one-, three-, and five-year periods ended June 30, 2018. 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, 2018, but had underperformed its peer group median for the five-year period ended June 30, 2018.
11. 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 underperformed its primary benchmark index, the MSCI Emerging Markets Index, for the one-, three- and five-year periods ended June 30, 2018. The Board also noted that the Institutional Shares of the Fund had underperformed its peer group median for the one-, three- and five-year periods ended June 30, 2018. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
12. 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 three-year period ended June 30, 2018, but had underperformed its primary benchmark index for the one-year period ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the three-year period ended June 30, 2018, but had underperformed its peer group median for the one-year period ended June 30, 2018.
13. 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 Index, for the one- and three-year periods ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had underperformed its peer group median for the one- and three-year periods ended June 30, 2018. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
14. 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 Bloomberg Barclays Mortgage Backed Securities Index, for the one-year period, but had underperformed its primary benchmark index for the three-year period ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one- and three-year periods ended June 30, 2018.
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15. Total Return Fund
The Board then reviewed information and materials regarding the performance results for the Total Return Fund, noting that the Institutional Shares of the Fund had outperformed its primary benchmark index, the Bloomberg Barclays US Aggregate Bond Index, for the one- and three-year periods ended June 30, 2018. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one- and three-year periods ended June 30, 2018.
16. Global Leaders Fund
The Board next reviewed information and materials regarding the performance results for the Global Leaders Fund, noting that the Investor Shares of the Fund had outperformed its primary benchmark index, the Russell Global Large Cap Index, for the one-year period ended June 30, 2018. The Board noted that the Investor Shares of the Fund had outperformed its peer group median for the one-year period ended June 30, 2018.
17. Mid-Cap Growth Fund
The Board then reviewed information and materials regarding the performance results for the Mid-Cap Growth Fund, noting that the Fund had only commenced investment operations as of October 2, 2017 and therefore did not have an extensive operating history. The Board reviewed certain information regarding the performance of the Fund and considered the Fund’s investment performance since its inception date.
18. Sustainable Bond Fund
The Board next reviewed information and materials regarding the performance results for the Sustainable Bond Fund, noting that the Fund had only commenced investment operations as of August 8, 2017 and therefore did not have an extensive operating history. The Board reviewed certain information regarding the performance of the Fund and considered the Fund’s investment performance since its inception date.
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, 2019, 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 subject 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 for the relevant share classes of the Funds as compared to the advisory fees and overall expenses (excluding Rule 12b-1 fees) of other mutual funds in each Fund’s peer group, as follows:
1. 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 Institutional Shares was 0.77%, which is lower than the median net expense ratio of its peer funds.
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2. 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 Institutional Shares was 0.72%, which was lower than the median net expense ratio of its peer funds. The Board took into account that the Adviser was proposing the addition of breakpoints to the Fund’s investment advisory fee such that the advisory fee charged with respect to the Fund would be 0.50% on all assets less than $150 million; 0.45% on all assets greater than or equal to $150 million but less than $250 million; 0.40% on all assets greater than or equal to $250 million but less than $1 billion; and 0.38% on all assets greater than or equal to $1 billion.
3. 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. The Board also noted that the net expense ratio of the Fund’s Institutional Shares was 0.71%, which was below the median net expense ratio of its peer funds. The Board took into account that the Adviser was proposing the addition of breakpoints to the Fund’s investment advisory fee such that the advisory fee charged with respect to the Fund would be 0.60% on all assets less than $1.5 billion; 0.55% on all assets greater than or equal to $1.5 billion but less than $3 billion; 0.50% on all assets greater than or equal to $3 billion but less than $6 billion; and 0.45% on all assets greater than or equal to $6 billion.
4. 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 Institutional Shares was 0.97%, which was above the median net expense ratio of its peer funds.
5. 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 Institutional Shares was 0.98%, which was lower than the median net expense ratio of its peer funds.
6. 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 Institutional Shares was 0.73%, which was lower than the average net expense ratio of its peer funds. The Board took into account that the Adviser was proposing the addition of breakpoints to the Fund’s investment advisory fee such that the advisory fee charged with respect to the Fund would be 0.60% on all assets less than $1.5 billion; 0.55% on all assets greater than or equal to $1.5 billion but less than $3 billion; 0.50% on all assets greater than or equal to $3 billion but less than $6 billion; and 0.45% on all assets greater than or equal to $6 billion.
7. 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.
8. 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 0.48%, which was lower than the median net expense ratio of its peer funds.
9. 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.
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The Board also noted that the net expense ratio of the Fund’s Institutional Shares was 0.62%, which was lower than the median net expense ratio of its peer funds.
10. 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 0.48%, which was lower than the median net expense ratio of its peer funds.
11. 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 1.15%, which was lower than the median net expense ratio of its peer funds.
12. WMC Strategic European Equity Fund
The Board next reviewed expense information and materials for the WMC Strategic European Equity Fund, noting that the Investment Advisory Agreement provided for a 0.90% investment advisory fee for the Fund, which was above the median for its peer funds. The Board also noted that the net expense ratio of the Fund’s Institutional Shares was 1.07%, which was lower than the median net expense ratio of its peer funds.
13. 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 above the median net expense ratio of its peer funds.
14. 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.
15. Total Return Fund
The Board then reviewed expense information and materials for the Total Return 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 0.50%, which was lower than the median net expense ratio of its peer funds.
16. Global Leaders Fund
The Board then reviewed expense information and materials for the Global Leaders Fund, noting that the Investment Advisory Agreement provided for a 0.65% 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 0.85%, which was lower than the median net expense ratio of its peer funds.
17. Mid-Cap Growth Fund
The Board next reviewed expense information and materials for the Mid-Cap Growth Fund, noting that the Investment Advisory Agreement provided for a 0.65% 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 0.85%, which was lower than the median net expense ratio of its peer funds.
18. Sustainable Bond Fund
The Board then reviewed expense information and materials for the Sustainable 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 0.60%, which was lower than the median net expense ratio of its peer funds.
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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, for most of the Funds, the Funds’ investment advisory fees will not decrease as those 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 market. The Trustees took into consideration that the Adviser had proposed to implement breakpoints in the investment advisory fee schedules for the Flexible Equity Fund, the Growth Equity Fund and the Sustainable Growth Fund. The Trustees took into consideration that the Adviser has previously informed the Board that the Adviser has consistently attempted to set the investment advisory fees at a level that provides for economies of scale by being set at a starting point that is at a reasonable rate without necessarily requiring the imposition of breakpoints, which approach has been favorably recognized by relevant court decisions as one of the acceptable means of achieving economies of scale. In this regard, the Trustees considered that the proposed breakpoints for the Flexible Equity Fund, the Growth Equity Fund and the Sustainable Growth Fund were being proposed not due to the fact that the fees were not initially set at a level that provides for economies of scale to be shared, but the proposed breakpoints are intended to help the Funds grow their assets in light of the competitive environment in which they operate. The Trustees also noted that the Funds’ advisory fees are competitive against their peers, and that the proposed breakpoints for the three Funds are intended to enhance the competitiveness of those Funds. The Trustees further noted that they will have the opportunity to periodically re-examine whether any of the other Funds in the Trust 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 other Funds could be considered further.
Benefits to Brown Advisory from its relationship with the Funds (and any corresponding benefits to the Funds). The Trustees concluded that certain 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 have 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 the Funds operate successfully. The Trustees also concluded that Brown Advisory has made a significant entrepreneurial commitment to the management and success of the Funds, which entails a substantial financial and professional commitment, including the Expense Limitation Agreement under which Brown Advisory has undertaken to waive a portion of its fees and to reimburse expenses of the Funds to the benefit of Fund shareholders to the extent necessary in accordance with the terms of the Expense Limitation Agreement. The Board also considered matters with respect to the brokerage practices of Brown Advisory, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
The Board also considered various matters with respect to the distribution and shareholder servicing arrangements applicable to the Funds and they considered the distribution fees and the non-distribution shareholder servicing fees payable with respect to certain of the share classes of the Funds, including certain of such fees which are payable to the Adviser for the shareholder administrative services that it provides to shareholders of the Funds. The Board took note of the fact that the non-distribution related shareholder administrative fees payable to the Adviser are intended to compensate the Adviser for providing certain administrative services to those Fund shareholders covered by the applicable servicing arrangements in the relevant share classes.
The Board also took into consideration the nature and extent of the business management fees payable to the Adviser by each of the Funds pursuant to which Brown Advisory provides certain business management services to the Funds, which the Board had previously considered and approved at a prior meeting based upon a finding that the business management fees charged are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality.
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds and (ii) the Continuation of the Sub-Investment Advisory Agreements for the Applicable Sub-Advised Funds
In reaching their conclusion with respect to the approval 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 continuation of 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 11, 2018.
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 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.
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds and (ii) the Continuation of the Sub-Investment Advisory Agreements for the Applicable Sub-Advised Funds
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, 2019. The Board took note of the fact that the sub-advisory fee had been separately negotiated by Brown Advisory and Somerset. Accordingly, on the basis of the Board’s review of the fees charged by Somerset for sub-investment advisory services provided to the Fund, the Board concluded that the level of sub-investment advisory fees are appropriate in light of the management fees, overall expense ratios and investment performance of comparable investment companies, and that the sub-advisory fee had been separately negotiated at arms-length by independent third parties.
The extent to which economies of scale may be realized as the Fund grows and whether the advisory fees reflect possible economies of scale. While it was noted that the Fund’s investment sub-advisory fees will not decrease as the Fund’s assets grow because they will not be subject to investment sub-advisory fee breakpoints, the Trustees concluded that the Fund’s investment sub-advisory fees are appropriate in light of the size of the Fund, and appropriately reflect the current economic environment for Brown Advisory and Somerset and the competitive nature of the mutual fund marketplace. The Trustees then noted that they will have the opportunity to periodically re-examine whether the Fund has achieved economies of scale, and the appropriateness of the investment sub-advisory fees with respect to the Fund, in the future at which time the implementation of fee breakpoints on the Fund could be further considered.
Benefits to Somerset from its relationship with the Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by Somerset from its relationship with the Fund, including any potential “soft dollar” benefits in connection with the Fund’s brokerage transactions and use of the Fund’s performance track record in advertising materials, are reasonable and fair, and consistent with industry practice and the best interests of the Fund and its shareholders.
Other Considerations. In approving the continuation of the Sub-Investment Advisory Agreement, the Trustees determined that Somerset has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to provide sub-advisory services to the Fund in a professional manner that is consistent with the best interests of the Fund and its shareholders. The Board also considered matters with respect to the brokerage practices of Somerset, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
It was noted that in making their determinations, the Trustees had considered and relied upon the materials provided to them by Somerset with respect to the contract and the presentation of the representatives of Brown Advisory. In reaching their conclusion with respect to the approval of the continuation of the Sub-Investment Advisory Agreement and the level of fees paid under the Agreement, the Trustees did not identify any one single factor as being controlling, rather, the Trustees took note of a combination of factors that had influenced their decision making process. They noted the level and quality of investment advisory services provided by Somerset to the Fund and determined that these services will continue to benefit the Fund and its shareholders. They also considered the nature of the allocation of the duties and responsibilities for the management and operation of the Fund between Brown Advisory and Somerset and they determined that the sub-advisory fee, as negotiated by Brown Advisory and Somerset, reasonably reflected the nature and extent of the services provided by Somerset with respect to the Fund.
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
The continuation of 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 11, 2018.
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
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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.
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, 2019. 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
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds and (ii) the Continuation of the Sub-Investment Advisory Agreements for the Applicable Sub-Advised Funds
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 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 Continuation of the Sub-Investment Advisory Agreement With Respect to the Brown Advisory Global Leaders Fund
At their September 11, 2018 Board meeting, the Board also undertook the consideration of matters with respect to the proposed continuation of the Sub-Investment Advisory Agreement between Brown Advisory and its affiliate Brown Advisory Ltd. with respect 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 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 Brown Advisory and Brown Advisory Ltd., 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 Brown Advisory Ltd., the Board of Trustees requested, and Brown Advisory and Brown Advisory Ltd. provided, information and data relevant to the Board’s consideration. In connection with these matters with respect to the sub-advisory arrangements for the Global Leaders Fund, the Trustees took into consideration the fact that the two firms are affiliates of one another and under common control.
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 Brown Advisory Ltd. The Trustees considered various matters involving the respective services provided by each of Brown Advisory and Brown Advisory Ltd. in connection with the management and operation of the Fund and they took note of the extensive oversight duties performed by Brown Advisory including investment management and compliance oversight of the operations of Brown Advisory Ltd. The Trustees considered that Brown Advisory is actively engaged in conducting an ongoing monitoring program involving Brown Advisory Ltd.’s investment activities with respect to Brown Advisory Ltd.’s day-to-day portfolio management of the Fund’s assets in order to make sure that Brown Advisory Ltd. 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 Brown Advisory’s oversight of the investment program maintained by Brown Advisory Ltd. with respect to the Fund, Brown Advisory prepares extensive reports to the Board regarding the investment activities of Brown Advisory Ltd., which reports contain detailed analyses of how Brown Advisory Ltd. is performing.
The Board reviewed and evaluated the information that Brown Advisory and Brown Advisory Ltd. 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 Brown
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for the Funds and (ii) the Continuation of the Sub-Investment Advisory Agreements for the Applicable Sub-Advised Funds
Advisory Ltd. and Brown Advisory 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 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 Brown Advisory Ltd. 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 Brown Advisory Ltd.’s investment management processes. On the basis of the Trustees’ assessment of the nature, extent and quality of the sub-advisory services provided by Brown Advisory Ltd., the Trustees concluded that Brown Advisory Ltd. 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 Funds to limit the Funds’ operating expenses through October 31, 2019. Accordingly, on the basis of the Board’s review of the fees charged by Brown Advisory Ltd. 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.
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 Brown Advisory Ltd. 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 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 Brown Advisory Ltd. from its relationship with the Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by Brown Advisory Ltd. from its relationships 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 Brown Advisory Ltd. 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 Brown Advisory Ltd., 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 Brown Advisory Ltd. with respect to the contract and the presentation of the representatives of Brown Advisory. In reaching their conclusion with respect to the approval of the continuation of the Sub-Investment Advisory Agreement and the level of fees paid under the Agreement, the Trustees did not identify any one single factor as being controlling, rather, the Trustees took note of a combination of factors that had influenced their decision making process. They noted the level and quality of investment advisory services provided by Brown Advisory Ltd. to the Fund and determined that these services will continue to benefit the Fund and its shareholders. They also considered the nature of the allocation of the duties and responsibilities for the management and operation of the Fund between Brown Advisory and Brown Advisory Ltd. and they determined that the sub-advisory fees for the Fund, as negotiated by Brown Advisory and Brown Advisory Ltd., reasonably reflected the nature and extent of the services provided by Brown Advisory Ltd. with respect to the Fund. The Trustees also took into consideration the fact that Brown Advisory and Brown Advisory Ltd. are affiliated entities and under common control.
148
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.brownadvisory.com/mf. 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)
Prior to 2019, the Funds have filed their complete schedules of portfolio holdings for their first and third fiscal quarters with the SEC on Form N-Q. Beginning in 2019, the Funds will be filing their complete schedules of portfolio holdings for their first and third fiscal quarters with the SEC on Part F of Form N-PORT. Both Forms N-Q and N-PORT are available without charge, upon request, by calling toll-free at (800) 540-6807. Furthermore, you can obtain these Forms on the SEC’s website at www.sec.gov. The Funds’ portfolio holdings are posted on their website at www.brownadvisory.com/mf 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 (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.
149
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.
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INVESTMENT ADVISER
Brown Advisory LLC
901 South Bond Street, Suite 400
Baltimore, MD 21231
www.brownadvisory.com
DISTRIBUTOR
Quasar Distributors, LLC
777 East Wisconsin Avenue
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
(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 |
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 |
Mid-Cap Growth Fund | BAFMX | 115233413 | BMIDX | 115233439 | — | — |
Small-Cap Growth Fund | BAFSX | 115233819 | BIASX | 115233835 | BASAX | 115233827 |
Small-Cap Fundamental Value Fund | BAUUX | 115233777 | BIAUX | 115233793 | BAUAX | 115233785 |
Global Leaders Fund | BAFLX | 115233355 | BIALX | 115233462 | — | — |
Intermediate Income Fund | — | — | BIAIX | 115233744 | BAIAX | 115233736 |
Total Return Fund | BAFTX | 115233538 | BIATX | 115233520 | — | — |
Strategic Bond Fund | BIABX | 115233470 | BATBX | 115233710 | — | — |
Sustainable Bond Fund | BAISX | 115233389 | BASBX | 115233447 | — | — |
Maryland Bond Fund | — | — | BIAMX | 115233751 | — | — |
Tax-Exempt Bond Fund | BTEIX | 115233371 | BIAEX | 115233108 | — | — |
Mortgage Securities Fund | BAFZX | 115233546 | BIAZX | 115233587 | — | — |
WMC Strategic European Equity Fund | BAFHX | 115233629 | BIAHX | 115233611 | BAHAX | 115233595 |
Emerging Markets Select Fund | BAFQX | 115233652 | BIAQX | 115233645 | BAQAX | 115233637 |
Beutel Goodman Large-Cap Value Fund | BVALX | 115233421 | — | — | — | — |
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 for semi-annual reports.
Item 6. Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed‑End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s 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 have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 13. Exhibits.
(a) | (1) Not applicable |
(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c‑1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(4) Change in the registrant’s independent public accountant. There was no change in the registrant’s independent public accountant for the period covered by this report.
(b) | Certifications pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. Filed 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) Brown Advisory Funds
By (Signature and Title)* /s/ Paul J. Chew
Paul J. Chew, Principal Executive Officer
Date March 7, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ Paul J. Chew
Paul J. Chew, Principal Executive Officer
Date March 7, 2019
By (Signature and Title)* /s/ Jason T. Meix
Jason T. Meix, Principal Financial Officer
Date March 7, 2019
* Print the name and title of each signing officer under his or her signature.