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)
David M. Churchill
Principal Executive Officer
Brown Advisory Funds
901 South Bond Street Suite 400
Baltimore, MD 21231
(Name and address of agent for service)
(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, 2017
Item 1. Reports to Stockholders.
SEMI-ANNUAL REPORT
December 31, 2017
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 – Macquarie Asia New Stars Fund
TABLE OF CONTENTS
Brown Advisory Growth Equity Fund | 1 | |
Brown Advisory Flexible Equity Fund | 4 | |
Brown Advisory Equity Income Fund | 7 | |
Brown Advisory Sustainable Growth Fund | 10 | |
Brown Advisory Mid-Cap Growth Fund | 13 | |
Brown Advisory Small-Cap Growth Fund | 17 | |
Brown Advisory Small-Cap Fundamental Value Fund | 21 | |
Brown Advisory Global Leaders Fund | 25 | |
Brown Advisory Intermediate Income Fund | 28 | |
Brown Advisory Total Return Fund | 32 | |
Brown Advisory Strategic Bond Fund | 38 | |
Brown Advisory Sustainable Bond Fund | 47 | |
Brown Advisory Maryland Bond Fund | 51 | |
Brown Advisory Tax Exempt Bond Fund | 55 | |
Brown Advisory Mortgage Securities Fund | 61 | |
Brown Advisory – WMC Strategic European Equity Fund | 74 | |
Brown Advisory – WMC Japan Alpha Opportunities Fund | 78 | |
Brown Advisory – Somerset Emerging Markets Fund | 83 | |
Brown Advisory – Macquarie Asia New Stars Fund | 86 | |
Statements of Assets and Liabilities | 89 | |
Statements of Operations | 94 | |
Statements of Changes in Net Assets | 99 | |
Financial Highlights | 109 | |
Notes to Financial Statements | 117 | |
Additional Information | 131 |
The views in the report contained herein were those of the Funds’ investment adviser, Brown Advisory LLC, or, for the sub-advised funds, of the respective sub-adviser, as of December 31, 2017 and may not reflect their views on the date this report is first published or anytime thereafter. This report may contain discussions about certain investments both held and not held in the portfolio as of December 31, 2017. 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, as defined by FTSE Russell.
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, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Growth Equity Fund Investor Shares (the “Fund”) increased 12.99% in value. During the same period, the Russell 1000 Growth Index, the Fund’s benchmark, increased 14.23%.
While the Fund modestly underperformed for the six-month period ended December 31, 2017, the market backdrop in general has been more conducive to our investment approach as compared to 2016. The primary factors driving stocks shifted back to fundamentals and growth prospects–as opposed to the macro factors that have been driving the market in recent years. This was a welcome positive for the portfolio, as many of our holdings produced strong results, and their stocks responded positively. Stock price correlations have also come down which we believe has created a greater opportunity set and an improved environment for stock picking.
The consumer sector remains volatile due to the market’s preoccupation with handicapping winners and losers in a world rapidly adapting to e-commerce. Following Amazon’s announcement that it would acquire Whole Foods earlier in the year, a large number of traditional business models came under the spotlight as potentially being at risk for disruption from online purveyors. Our team has been focused on this trend for several years, and we have tried to be thoughtful in allocating capital to companies that we believe are both obvious beneficiaries, such as Alibaba and Amazon, as well as less obvious ones, like Estee Lauder. Historically, Estee Lauder had a brick-and-mortar business model. In recent years, however, it made major investments in distribution capabilities to become an omnichannel business model. These efforts are driving impressive results, and the market is starting to recognize this fact. Unfortunately, we did not get all of the changing dynamics in the consumer sector right. We believe that online travel is a very attractive segment that benefits from a number of secular trends. These trends were part of our overall investment thesis for TripAdvisor. Our patience with TripAdvisor was based on its successful business transition that would ultimately monetize its considerable volume of users and traffic at a much higher rate. While we continue to believe in the value of TripAdvisor’s large active user base and rich website content, we have lost confidence in the management team’s ability to convert those assets into revenue and earnings growth. As such, we sold our position in the company. Earlier in the year, however, we reduced our position size and initiated a complementary position in Priceline, a larger, more mature business model within the same segment.
The secular migration to ecommerce has also materially benefited digital payment platforms. While they are categorized as technology stocks, PayPal and Visa have been positioned well to capture the increasing volume of online consumer activity. Both are market leaders in their respective segments of the digital payment ecosystem and have been working tirelessly to reduce the friction involved with paying for goods and services all over the world.
The portfolio experienced a modest pullback in late-November through December as investors rotated out of stocks and sectors that had been outperforming into those that were lagging on a year-to-date basis, such as energy, telecom, and industrials. Our industrial holdings–many of which are working well–did not keep pace with the benchmark’s rally on the prospects of tax reform. The industrials sector gained over 18% in the six-month period driven in large part by highly cyclical businesses such as heavy equipment manufacturers and defense companies which typically do not meet the growth criteria for this portfolio. One of our holdings Wabtec which makes components for the freight rail industry traded lower. Their results have lagged the recovery in rail volumes, which has caused investors to sell the stock. We believe it is primarily related to timing, and the company recently made an acquisition which will lessen the cyclicality of their business going forward.
Our health care holdings also performed well generally; however, Dexcom, a leader in continuous glucose monitoring (CGM) devices, experienced some volatility around a competitive announcement in September. Abbott Laboratories won FDA approval for their CGM device a bit earlier than expected. While this event was anticipated, the stock was rattled by the headlines—an overreaction, in our view. We believe that the global market for CGM is very large and significantly underpenetrated, and while competitive announcements create short-term uncertainty for Dexcom, our long-term thesis remains very much intact. We believe the company still has a meaningful technology advantage and a market-leading position over both Abbott and Medtronic for CGM devices.
Geopolitical dynamics still dominate the headlines, but fortunately they have not been the primary drivers of stock prices recently. We find it refreshing when fundamentally sound companies are rewarded for solid execution and delivering results for shareholders. Our investment process favors companies with business models that we believe are capable of sustainable growth over all other characteristics. While this characteristic is not always in favor, we view it as an attribute that has repeatedly proven to be an indicator of long-term performance.
Sincerely,
Kenneth M. Stuzin, CFA
Portfolio Manager
1
Brown Advisory Growth Equity Fund
A Message to Our Shareholders
December 31, 2017
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, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 94.3% | ||||||||
Consumer Discretionary — 20.4% | ||||||||
252,456 | Alibaba Group Holding, Ltd. ADR* | 43,530,988 | ||||||
63,270 | Amazon.com, Inc.* | 73,992,367 | ||||||
115,298 | Charter Communications, Inc.* | 38,735,516 | ||||||
289,762 | FleetCor Technologies, Inc.* | 55,758,902 | ||||||
1,478,598 | Genpact, Ltd. | 46,930,701 | ||||||
21,829 | Priceline Group, Inc.* | 37,933,126 | ||||||
723,625 | Starbucks Corp. | 41,557,784 | ||||||
580,016 | TJX Companies, Inc. | 44,348,023 | ||||||
382,787,407 | ||||||||
Consumer Staples — 6.3% | ||||||||
288,367 | Costco Wholesale Corp. | 53,670,866 | ||||||
505,586 | Estee Lauder Companies, Inc. | 64,330,763 | ||||||
118,001,629 | ||||||||
Health Care — 17.3% | ||||||||
697,611 | Danaher Corp. | 64,752,253 | ||||||
561,470 | DexCom, Inc.* | 32,222,763 | ||||||
267,687 | Edwards Lifesciences Corp.* | 30,171,002 | ||||||
184,886 | Intuitive Surgical, Inc.* | 67,472,297 | ||||||
274,088 | Thermo Fisher Scientific, Inc. | 52,043,829 | ||||||
1,083,714 | Zoetis, Inc. | 78,070,757 | ||||||
324,732,901 | ||||||||
Industrials — 12.1% | ||||||||
666,428 | A.O. Smith Corp. | 40,838,708 | ||||||
469,807 | BWX Technologies, Inc. | 28,418,626 | ||||||
857,775 | Fortive Corp. | 62,060,021 | ||||||
256,609 | Roper Technologies, Inc. | 66,461,731 | ||||||
378,061 | Wabtec Corp. | 30,785,507 | ||||||
228,564,593 | ||||||||
Information Technology — 34.9% | ||||||||
378,799 | Adobe Systems, Inc.* | 66,380,737 | ||||||
13,704 | Alphabet, Inc. — Class A* | 14,435,793 | ||||||
62,860 | Alphabet, Inc. — Class C* | 65,776,704 | ||||||
783,367 | Amphenol Corp. | 68,779,623 | ||||||
229,856 | ANSYS, Inc.* | 33,924,447 | ||||||
326,570 | Electronic Arts, Inc.* | 34,309,444 | ||||||
390,616 | Facebook, Inc.* | 68,928,099 | ||||||
352,786 | Intuit, Inc. | 55,662,575 | ||||||
266,867 | NXP Semiconductors NV* | 31,247,457 | ||||||
975,638 | PayPal Holdings, Inc.* | 71,826,469 | ||||||
633,603 | salesforce.com, Inc.* | 64,773,235 | ||||||
700,730 | Visa, Inc. | 79,897,235 | ||||||
655,941,818 | ||||||||
Materials — 3.3% | ||||||||
470,217 | Ecolab, Inc. | 63,093,717 | ||||||
Total Common Stocks (Cost $1,020,799,151) | 1,773,122,065 | |||||||
Real Estate Investment Trusts — 3.5% | ||||||||
396,607 | SBA Communications Corp.* | 64,789,719 | ||||||
Total Real Estate Investment Trusts (Cost $36,882,589) | 64,789,719 | |||||||
Short-Term Investments — 2.2% | ||||||||
Money Market Funds — 2.2% | ||||||||
41,317,180 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 41,317,180 | |||||||
Total Short-Term Investments (Cost $41,317,180) | 41,317,180 | |||||||
Total Investments — 100.0% (Cost $1,098,998,920) | 1,879,228,964 | |||||||
Other Assets in Excess of Liabilities — 0.0% | 238,422 | |||||||
NET ASSETS — 100.0% | $ | 1,879,467,386 | ||||||
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Information Technology | 34.9 | % | ||
Consumer Discretionary | 20.4 | % | ||
Health Care | 17.3 | % | ||
Industrials | 12.1 | % | ||
Consumer Staples | 6.3 | % | ||
Real Estate Investment Trusts | 3.5 | % | ||
Materials | 3.3 | % | ||
Money Market Funds | 2.2 | % | ||
Other Assets and Liabilities | 0.0 | % | ||
100.0 | % |
ADR — American Depositary Receipt | ||
* | Non-Income Producing | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
3
Brown Advisory Flexible Equity Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Flexible Equity Fund Investor Shares (the “Fund”) increased 12.58% in value, exceeding the returns of the S&P 500® Index (“the Index”), the Fund’s benchmark, which rose 11.42%.
Recent equity results reflect a continuation of the very favorable equity environment which, in addition to general economic expansion, low interest rates and high levels of business, investor and consumer confidence, added a significant corporate tax cut in late December to push stocks higher through the period. We see no immediate reason for this to change—global economic growth seems to be strengthening—but positive sentiment can carry prices too far for unexpected events, or any erosion in the environment, to maintain. Beginning in March 2009, the current bull market ranks as the second-longest in length and third-highest in gain going back to the Great Depression. History shows that markets and environments do change—sometimes due to market dynamics and sometimes due to world events which had not previously been fully incorporated into market levels. Neither of these are predictable, however.
Equity investing is a positive sum game cumulatively over the long run and about 70% of the time in the short run, but not all the time. Thus, we repeat our two-part message from the Annual Report. First, we believe that investing in stocks of quality companies at sensible prices is wise over time. And second, owning stocks without the disposition and financial capacity to keep or add to them in less favorable environments can present problems when unexpected market shifts occur.
Stock valuations are high today compared to history, but not so high relative to interest rates that remain low. The median stock (with earnings) trades for about 20 times estimated earnings. At the market low in 2009, this number was about 10 times and a historical median is about 15 times. But valuations need to be looked at relative to their alternatives and 20 times for stocks is low in comparison to the P/E equivalent of 40 times the coupon of a 2.5% yield on a 10-year U.S. Treasury bond. Bond yields are low historically and with the U.S. Federal Reserve in the process of normalizing interest rates, we suspect it will go higher. At 2.5% though, the interest rate in the U.S. is high relative to much lower rates in Germany and Japan.
The valuation puzzle for equities is how much higher bond rates—pushed up by a tightening Federal Reserve, though possibly constrained by low foreign interest rates rates—may go and when? Valuations usually have not set the direction of market moves, but they have helped indicate the potential size of a move once it has started.
Compared to the Index, the financials and information technology sectors were the strongest contributors to results in the period due to both our higher sector weightings and higher returns. The consumer discretionary sector was the biggest detractor to results posting an overall decline versus the strong return and lower weighting of the sector in the Index.
Top contributors Visa and MasterCard, the largest and third-largest holdings in the portfolio, increased in value as both posted strong results and announced new initiatives to support and enhance future growth. Additional large contributors included Ameriprise Financial, a financial services company; Berkshire Hathaway, a diversified insurance and industrial company (Warren Buffett’s company); and Microsoft, a software and services provider. These companies reported strong business results and we maintain our favorable view of their long-term prospects. Additionally, these companies may all benefit from the reduction in the corporate tax rate.
We added several new holdings and eliminated two since our June 30, 2017 Annual Report to shareholders.
New investments include Conagra Brands, a packaged food company; Delta Air Lines, an airline; Nomad Foods, a European food manufacturer; Suncor Energy, a Canadian integrated energy company; and UnitedHealth Group, a leading managed healthcare company.
We see Conagra Brands being revitalized under new leadership. Led by a CEO with an impressive track record, the new management team is in the process of transforming the company by becoming leaner, selling-off commodity-like assets and improving its food portfolio. They are focused on profitability rather than volume growth. We think they will make further progress, which we believe has the potential to provide attractive returns.
We invested in Delta Air Lines based on our thesis that the consolidation in the airline industry has the potential to lead to better profitability and less industry cyclicality. Delta has used its prosperity to reduce debt, upgrade its fleet, increase dividends and buy back stock. As the case for less competitive rivalry and profit cyclicality unfolds, we believe Delta can achieve a higher valuation.
Nomad Foods Executive Chairman Martin E. Franklin has a track record of creating meaningful shareholder value at Jarden Corporation over a 15-year period. We believe our investment in Nomad Foods has the potential to grow in value as the management team improves the existing business with better marketing strategies and bolt-on acquisitions in the food industry.
4
Brown Advisory Flexible Equity Fund
A Message to Our Shareholders
December 31, 2017
Suncor is a low-cost oil producer in Canada with a long-lived resource base and management that showed effective capital allocation skills during the oil price downturn. We believe Suncor has the potential to benefit from improving commodity prices.
UnitedHealth Group has distinguished itself with superior data use to drive innovation and execution for better patient outcomes and returns to investors. Managed healthcare is an attractive industry that has benefited from a tollbooth position on continually rising healthcare spending. Our favorable view of UnitedHealth Group’s business results over time–which we expect will continue–combined with a valuation in line with market averages led us to this new investment.
In the period, we also sold our investments in Express Scripts and Teva Pharmaceuticals. We eliminated Express Scripts, a pharmacy benefits manager, due to erosion of their competitive position and loss of a key customer. We eliminated Teva Pharmaceutical, a branded and generics drug manufacturer, from the portfolio after our original investment thesis did not materialize. Teva disappointed fundamentally with volume weakness and pricing erosion in the generics business, in addition to the lack of leadership at the time of our sale.
We search for what we believe to be investment bargains among long-term attractive businesses with shareholder-oriented management teams. These businesses should have or develop: competitive advantages that result in favorable business economics, management teams 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, 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 ability 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
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.
5
Brown Advisory Flexible Equity Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 92.9% | ||||||||
Consumer Discretionary — 13.8% | ||||||||
189,074 | CarMax, Inc.* | 12,125,316 | ||||||
17,206 | Chipotle Mexican Grill, Inc.* | 4,973,050 | ||||||
218,282 | Hanesbrands, Inc. | 4,564,277 | ||||||
155,948 | Lowe’s Companies, Inc. | 14,493,807 | ||||||
7,453 | Priceline Group, Inc.* | 12,951,376 | ||||||
74,318 | TJX Companies, Inc. | 5,682,354 | ||||||
75,122 | Walt Disney Co. | 8,076,366 | ||||||
62,866,546 | ||||||||
Consumer Staples — 3.8% | ||||||||
150,801 | Conagra Brands, Inc. | 5,680,674 | ||||||
372,214 | Nomad Foods, Ltd.* | 6,294,139 | ||||||
45,932 | PepsiCo, Inc. | 5,508,165 | ||||||
17,482,978 | ||||||||
Energy — 4.3% | ||||||||
512,972 | Kinder Morgan, Inc. | 9,269,404 | ||||||
94,139 | Occidental Petroleum Corp. | 6,934,279 | ||||||
96,510 | Suncor Energy, Inc. | 3,543,847 | ||||||
19,747,530 | ||||||||
Financials — 24.7% | ||||||||
79,277 | Ameriprise Financial, Inc. | 13,435,073 | ||||||
382,741 | Bank of America Corp. | 11,298,514 | ||||||
118,579 | Berkshire Hathaway, Inc.* | 23,504,730 | ||||||
312,710 | Charles Schwab Corp. | 16,063,913 | ||||||
138,812 | JPMorgan Chase & Co. | 14,844,555 | ||||||
627,633 | Regions Financial Corp. | 10,845,498 | ||||||
37,622 | T. Rowe Price Group, Inc. | 3,947,677 | ||||||
303,118 | Wells Fargo & Co. | 18,390,169 | ||||||
112,330,129 | ||||||||
Health Care — 7.8% | ||||||||
37,106 | Aetna, Inc. | 6,693,551 | ||||||
22,918 | Anthem, Inc. | 5,156,779 | ||||||
100,892 | Edwards Lifesciences Corp.* | 11,371,537 | ||||||
55,257 | Merck & Co., Inc. | 3,109,312 | ||||||
41,078 | UnitedHealth Group, Inc. | 9,056,056 | ||||||
35,387,235 | ||||||||
Industrials — 7.3% | ||||||||
100,052 | Canadian National Railway Co. | 8,254,290 | ||||||
114,491 | Delta Air Lines, Inc. | 6,411,496 | ||||||
31,097 | General Dynamics Corp. | 6,326,685 | ||||||
28,639 | United Rentals, Inc.* | 4,923,330 | ||||||
55,625 | United Technologies Corp. | 7,096,081 | ||||||
33,011,882 | ||||||||
Information Technology — 31.2% | ||||||||
61,485 | Accenture PLC | 9,412,739 | ||||||
5,631 | Alphabet, Inc. — Class A* | 5,931,695 | ||||||
15,389 | Alphabet, Inc. — Class C* | 16,103,050 | ||||||
88,891 | Apple, Inc. | 15,043,024 | ||||||
153,945 | eBay, Inc.* | 5,809,884 | ||||||
73,819 | Facebook, Inc.* | 13,026,101 | ||||||
128,352 | MasterCard, Inc. | 19,427,359 | ||||||
172,070 | Microsoft Corp. | 14,718,868 | ||||||
129,207 | PayPal Holdings, Inc.* | 9,512,219 | ||||||
113,908 | QUALCOMM, Inc. | 7,292,390 | ||||||
227,169 | Visa, Inc. | 25,901,809 | ||||||
142,179,138 | ||||||||
Total Common Stocks (Cost $256,433,787) | 423,005,438 | |||||||
Real Estate Investment Trusts — 1.7% | ||||||||
71,090 | Crown Castle International Corp. | 7,891,701 | ||||||
Total Real Estate Investment Trusts (Cost $5,184,138) | 7,891,701 | |||||||
Closed-End Funds — 2.7% | ||||||||
175,192 | Altaba, Inc.* | 12,237,161 | ||||||
Total Closed-End Funds (Cost $5,227,036) | 12,237,161 | |||||||
Warrants — 0.1% | ||||||||
20,000 | Wells Fargo & Co., Exercise | |||||||
price $33.70 expires 10/28/2018* | 552,000 | |||||||
Total Warrants (Cost $221,299) | 552,000 | |||||||
Short-Term Investments — 1.8% | ||||||||
Money Market Funds — 1.8% | ||||||||
7,995,064 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 7,995,064 | |||||||
Total Short-Term Investments (Cost $7,995,064) | 7,995,064 | |||||||
Total Investments — 99.2% (Cost $275,061,324) | 451,681,364 | |||||||
Other Assets in Excess of Liabilities — 0.8% | 3,441,523 | |||||||
NET ASSETS — 100.0% | $ | 455,122,887 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Information Technology | 31.2 | % | ||
Financials | 24.7 | % | ||
Consumer Discretionary | 13.8 | % | ||
Health Care | 7.8 | % | ||
Industrials | 7.3 | % | ||
Energy | 4.3 | % | ||
Consumer Staples | 3.8 | % | ||
Closed-End Funds | 2.7 | % | ||
Money Market Funds | 1.8 | % | ||
Real Estate Investment Trusts | 1.7 | % | ||
Warrants | 0.1 | % | ||
Other Assets and Liabilities | 0.8 | % | ||
100.0 | % |
* | Non-Income Producing | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
6
Brown Advisory Equity Income Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Equity Income Fund Investor Shares (the “Fund”) increased 10.07% in value. During the same period, the S&P 500® Index (“the Index”), the Fund’s benchmark, increased 11.42%.
U.S. stocks rose during the period, extending gains for investors that were generated fairly consistently and evenly throughout all of 2017. The fuel tank for the stock market’s steady rise for the period and the year was a backdrop of synchronized global economic growth that, in turn, helped generate healthy corporate profits worldwide.
The information technology (IT) sector led the way and was the best performing sector in the Index during the period. Fast-growing (but non-dividend-paying) companies such as Amazon.com and Facebook garnered significant investor attention and their stock prices surged. Yet, IT was not the only area of the market to post attractive gains. On a sector basis, all 11 sectors in the Index rose during the period and seven sectors rose by more than 10%. In sum, it was a good time to be a diversified investor with broad exposure to different parts of the market.
The Fund’s performance benefitted from the strength in the IT sector, where holdings such as Apple, Microsoft and Cisco Systems showed signs of accelerating business momentum in the current environment. Businesses worldwide have been investing more resources into their IT systems in areas such as cloud computing, cybersecurity and networking infrastructure to name a few. As a result, revenue growth has been accelerating and margins have been expanding at leading IT vendors such as Microsoft and Cisco. Among other IT holdings, chipmaker Qualcomm rose after rival semiconductor firm Broadcom announced an unsolicited takeover offer for the company. The Fund reduced its Qualcomm holding after the announcement, based on the unclear timing and uncertain regulatory hurdles of the proposed combination. Subsequently, Qualcomm’s board rejected the takeover offer on the basis that Broadcom’s proposal “significantly undervalues” the company.
It was also a favorable environment for the Fund’s consumer discretionary holdings–the largest contributing sector to performance during the period. The Fund’s exposure to the sector shifted from underweight to overweight with the addition of a new holding, Hasbro Inc. Hasbro is a high-quality toy and entertainment company with valuable brands and global manufacturing and distribution scale. Additionally, we believe that the outlook for Hasbro’s future earnings and dividend growth is bright as the company’s management team has demonstrated a capability to monetize its core brand platforms beyond toys and into areas such as film, TV, digital streaming, social media and gaming.
The Fund’s industrial holdings struggled and detracted from overall performance during the period. In particular, industrial conglomerate General Electric (GE) declined meaningfully after the company reported third quarter earnings that were far below expectations. The earnings and cash flow deterioration were most notable in the company’s power and oil and gas businesses, where projected customer demand for GE’s products was far too optimistic. Despite a new CEO intent on turning the company around, the lower cash flow forecast threatened the continuation of GE’s current dividend. We eliminated the stock from the Fund after the earnings report and ahead of a potential dividend cut, which became a reality later in the period. With the GE elimination, the Fund is now underweight to the industrials sector.
The consumer staples sector also detracted from performance because of weakness in tobacco holdings Altria and Philip Morris International. Most notably, Altria declined sharply after the U.S. Food and Drug Administration (FDA) announced that it is considering placing limits on the amount of nicotine allowed in traditional cigarettes. The Fund added to Altria on the basis that we believe any regulatory changes will likely take years to implement and are unlikely to impact the company’s near-term earnings. An exciting new component of those earnings could be the expected launch of reduced-risk products for smokers that have been developed by Philip Morris International. Once, and if, approved by the FDA, these new products are anticipated to be sold under license by Altria in the U.S.
In other portfolio moves, we added banking company Bank of America during the period and eliminated the Fund’s preferred shares of Public Storage after being called and redeemed by the company. In health care, we swapped generic and branded drugmaker Teva Pharmaceutical in favor of a new position in medical devices company Medtronic. We eliminated Teva after a string of business-related disappointments and operational miscues led to a reduction in cash flow guidance and an unexpected cut in the dividend. Meanwhile, Hurricane Maria caused disruptions to Medtronic’s Puerto Rico manufacturing operations and created what we believe was a favorable entry price into the stock.
7
Brown Advisory Equity Income Fund
A Message to Our Shareholders
December 31, 2017
Longer-term, we expect that Medtronic’s product and geographical scale has the potential to generate the type of steady, predictable earnings and dividend growth that the Fund seeks in all of its investments. It joins a list of existing companies in the portfolio that, in aggregate, offer strong dividend yields with a strong potential for future growth at what we believe to be reasonable levels of valuation.
Sincerely,
Brian Graney, CFA
Portfolio Manager
Past performance does not guarantee future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in smaller and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The value of the Fund’s investments in REITs and Real Estate may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. Investing in Master Limited Partnerships (“MLPs”) entails risk related to fluctuations in energy prices, decreases in supply of or demand for energy commodities, unique tax consequences due to the partnership structure and various other risks. 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.
8
Brown Advisory Equity Income Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks – 91.8% | ||||||||
Consumer Discretionary – 12.1% | ||||||||
28,231 | Best Buy Co., Inc. | 1,932,976 | ||||||
18,267 | Hasbro, Inc. | 1,660,288 | ||||||
9,877 | Home Depot, Inc. | 1,871,988 | ||||||
14,203 | Lowe’s Companies, Inc. | 1,320,027 | ||||||
24,880 | McDonald’s Corp. | 4,282,346 | ||||||
42,109 | V.F. Corp. | 3,116,066 | ||||||
14,183,691 | ||||||||
Consumer Staples — 13.6% | ||||||||
80,717 | Altria Group, Inc. | 5,764,001 | ||||||
61,238 | Coca-Cola Co. | 2,809,599 | ||||||
37,758 | Philip Morris International, Inc. | 3,989,133 | ||||||
59,688 | Unilever NV ADR | 3,361,628 | ||||||
15,924,361 | ||||||||
Energy — 5.1% | ||||||||
64,864 | Kinder Morgan, Inc. | 1,172,092 | ||||||
32,232 | Occidental Petroleum Corp. | 2,374,209 | ||||||
67,440 | Suncor Energy, Inc. | 2,476,397 | ||||||
6,022,698 | ||||||||
Financials — 17.4% | ||||||||
21,105 | Ameriprise Financial, Inc. | 3,576,664 | ||||||
92,695 | Bank of America Corp. | 2,736,357 | ||||||
30,207 | Cincinnati Financial Corp. | 2,264,619 | ||||||
18,079 | Erie Indemnity Co. | 2,202,745 | ||||||
37,308 | JPMorgan Chase & Co. | 3,989,718 | ||||||
55,812 | Wells Fargo & Co. | 3,386,114 | ||||||
15,028 | Willis Towers Watson PLC | 2,264,569 | ||||||
20,420,786 | ||||||||
Health Care — 12.4% | ||||||||
43,909 | AbbVie, Inc. | 4,246,439 | ||||||
24,230 | Johnson & Johnson | 3,385,416 | ||||||
21,030 | Medtronic PLC | 1,698,172 | ||||||
41,359 | Merck & Co., Inc. | 2,327,271 | ||||||
34,782 | Novartis AG ADR | 2,920,297 | ||||||
14,577,595 | ||||||||
Industrials — 9.2% | ||||||||
9,627 | General Dynamics Corp. | 1,958,613 | ||||||
58,063 | Healthcare Services Group, Inc. | 3,061,081 | ||||||
64,689 | Nielsen Holdings PLC | 2,354,680 | ||||||
26,906 | United Technologies Corp. | 3,432,399 | ||||||
10,806,773 | ||||||||
Information Technology — 20.0% | ||||||||
19,504 | Accenture PLC | 2,985,867 | ||||||
27,706 | Apple, Inc. | 4,688,686 | ||||||
31,532 | Automatic Data Processing, Inc. | 3,695,235 | ||||||
103,697 | Cisco Systems, Inc. | 3,971,595 | ||||||
69,390 | Microsoft Corp. | 5,935,621 | ||||||
33,082 | QUALCOMM, Inc. | 2,117,910 | ||||||
23,394,914 | ||||||||
Materials — 2.0% | ||||||||
15,178 | Praxair, Inc. | 2,347,733 | ||||||
Total Common Stocks (Cost $63,282,925) | 107,678,551 | |||||||
Real Estate Investment Trusts — 6.7% | ||||||||
10,577 | American Tower Corp. | 1,509,021 | ||||||
45,860 | W.P. Carey, Inc. | 3,159,754 | ||||||
92,095 | Weyerhaeuser Co. | 3,247,270 | ||||||
Total Real Estate Investment Trusts (Cost $6,154,561) | 7,916,045 | |||||||
Short-Term Investments — 1.3% | ||||||||
Money Market Funds — 1.3% | ||||||||
1,505,250 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 1,505,250 | |||||||
Total Short-Term Investments (Cost $1,505,250) | 1,505,250 | |||||||
Total Investments — 99.8% (Cost $70,942,736) | 117,099,846 | |||||||
Other Assets in Excess of Liabilities — 0.2% | 256,412 | |||||||
NET ASSETS — 100.0% | $ | 117,356,258 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Information Technology | 20.0 | % | ||
Financials | 17.4 | % | ||
Consumer Staples | 13.6 | % | ||
Health Care | 12.4 | % | ||
Consumer Discretionary | 12.1 | % | ||
Industrials | 9.2 | % | ||
Real Estate Investment Trusts | 6.7 | % | ||
Energy | 5.1 | % | ||
Materials | 2.0 | % | ||
Money Market Funds | 1.3 | % | ||
Other Assets and Liabilities | 0.2 | % | ||
100.0 | % |
ADR — American Depositary Receipt | ||
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
9
Brown Advisory Sustainable Growth Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Sustainable Growth Fund Institutional Shares (the “Fund”) increased 11.94% in value. During the same period, the Russell 1000® Growth Index, the Fund’s benchmark, increased 14.23%.
The Fund’s relative underperformance was primarily due to weakness in industrials and materials. Our overweight in health care also contributed to the underperformance. These negative factors more than offset strong performance from many of our technology holdings.
The majority of our positive performance has come during periods of market weakness. We believe that our strict valuation discipline, preference for what we believe are 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. While we are pleased with our track record, we are not surprised that we have lagged in the most recent “risk-on” market. The majority of our portfolio consists of what we believe to be steady-growth companies with low double-digit bottom-line growth prospects. While we believe this has the potential to provide ballast in the event of macro weakness, it has not helped us in the current market environment.
Taking a closer look at the last six months, a number of our technology holdings contributed most positively to performance, including Microsoft, Adobe Systems and Red Hat. Strong growth from Microsoft’s public cloud business along with effective cost control execution contributed to robust results. Adobe Systems delivered a strong finish to the year, beating revenue estimates and issuing upbeat guidance for 2018. The total addressable market for its creative software and marketing solutions continues to grow as more content moves online. Red Hat’s enterprise operating system solution delivered double-digit revenue growth for the year. The company demonstrated impressive large deal momentum, solid renewal rates and successful cross-selling of its emerging technologies.
In terms of our largest detractors, Wabtec, Ball Corporation and TreeHouse Foods were our worst performers during the period. Wabtec’s freight aftermarket business performed much worse than expected and caused the company to reduce guidance multiple times. Wabtec was one of a few disappointing holdings within industrials during the period. We are particularly disappointed in our performance in this sector given that we believe industrials to be a point of differentiation for our strategy. Despite these disappointing results, we have not backed away from investing in the sector. We would characterize our recent mistakes as idiosyncratic rather than a function of a larger problem within the group. We will continue looking within the sector for attractive businesses that fit our investment criteria going forward.
Ball Corporation suffered from an unexpected beverage tax in the Middle East and a supply chain disruption caused by the hurricanes in the southern U.S. TreeHouse Foods missed earnings and lowered guidance due to deteriorating conditions in the retail food market. We exited our position in TreeHouse during the period.
Overall, we added four new names to the portfolio during the last six months including Aptiv, Nordson, Welbilt and West Pharmaceutical Services. Aptiv is a leading supplier of electrical architecture, safety products and electronics, and systems for light vehicles. Aptiv’s products have enabled auto manufacturers to meet increasingly stringent government regulations and consumer preferences for products that are safe, ‘green’ and connected. These trends have been leading to increased content per vehicle, greater profitability and higher margins.
Nordson manufactures precision technology solutions focused on material dispensing (adhesives and coatings), plastic/polymer processing, test and inspection, surface treatment and fluid handling. The company’s products are used to precisely apply, dispense and cure adhesives, paints, sealants, and coatings in a variety of consumer and industrial products. Nordson’s technology helps its customers reduce raw material usage in manufacturing applications.
Welbilt is a world-leading manufacturer of commercial foodservice equipment. Welbilt designs and manufacturers cooking, holding, food preparation, beverage dispensing, refrigeration and ice-making technologies. The company helps its customers by designing products that reduce energy and water consumption. Welbilt’s mobile connectivity and monitoring capabilities help commercial kitchens reduce downtime, optimize energy use and improve service response time.
West Pharmaceutical Services is a leading manufacturer of packaging components and delivery systems for injectable drugs and health care products. The company’s products promote the safety, purity and efficacy of the world’s pharmaceutical drug supply. West has had a dominant position in the market and supplies components for the top 35 biologics in the world.
10
Brown Advisory Sustainable Growth Fund
A Message to Our Shareholders
December 31, 2017
As for deletions during the period, we eliminated Hexcel given we believe investors have already discounted much of the strong growth in its aerospace business. We exited Middelby due to our belief that Welbilt has the potential to grow faster within the commercial foodservice market. Welbilt has a full lineup up of both hot and cold offerings combined with an integrated solution offering called FitKitchen. In contrast, Middleby lacks a full-service offering and has had a weaker lineup of cold equipment. As previously mentioned, we exited TreeHouse Foods given the deteriorating market environment.
While our relative underperformance for this period was disappointing, we maintain a disciplined process of discerning what we believe are 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 we believe 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 2018 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
Portfolio Manager
David Powell
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund’s investment focus on environmental factors could cause it to make or avoid investments that could result in the Fund underperforming similar funds that do not have an environmental focus. Investments in smaller 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.
11
Brown Advisory Sustainable Growth Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 90.3% | ||||||||
Consumer Discretionary — 9.5% | ||||||||
16,326 | Amazon.com, Inc.* | 19,092,767 | ||||||
105,566 | Aptiv PLC* | 8,955,164 | ||||||
1 | Delphi Technologies PLC* | 35 | ||||||
149,929 | Starbucks Corp. | 8,610,422 | ||||||
137,030 | TJX Companies, Inc. | 10,477,314 | ||||||
47,135,702 | ||||||||
Consumer Staples — 2.4% | ||||||||
212,746 | Unilever NV ADR | 11,981,855 | ||||||
Health Care — 18.8% | ||||||||
201,184 | Danaher Corp. | 18,673,899 | ||||||
119,336 | Edwards Lifesciences Corp.* | 13,450,361 | ||||||
36,636 | IDEXX Laboratories, Inc.* | 5,729,138 | ||||||
15,312 | Mettler-Toledo International, Inc.* | 9,486,090 | ||||||
103,954 | Thermo Fisher Scientific, Inc. | 19,738,785 | ||||||
94,127 | UnitedHealth Group, Inc. | 20,751,238 | ||||||
58,571 | West Pharmaceutical Services, Inc. | 5,779,201 | ||||||
93,608,712 | ||||||||
Industrials — 18.1% | ||||||||
214,091 | A.O. Smith Corp. | 13,119,496 | ||||||
174,439 | Fortive Corp. | 12,620,662 | ||||||
250,925 | Healthcare Services Group, Inc. | 13,228,766 | ||||||
120,407 | J.B. Hunt Transport Services, Inc. | 13,844,397 | ||||||
82,142 | Nordson Corp. | 12,025,589 | ||||||
132,707 | Verisk Analytics, Inc.* | 12,739,872 | ||||||
90,119 | Wabtec Corp. | 7,338,390 | ||||||
214,996 | Welbilt, Inc.* | 5,054,556 | ||||||
89,971,728 | ||||||||
Information Technology — 35.8% | ||||||||
123,774 | Adobe Systems, Inc.* | 21,690,156 | ||||||
19,791 | Alphabet, Inc. — Class A* | 20,847,839 | ||||||
2,705 | Alphabet, Inc. — Class C* | 2,830,512 | ||||||
97,403 | Cavium, Inc.* | 8,165,293 | ||||||
103,032 | Facebook, Inc.* | 18,181,027 | ||||||
93,968 | Intuit, Inc. | 14,826,271 | ||||||
272,872 | Microsoft Corp. | 23,341,471 | ||||||
85,341 | Monolithic Power Systems, Inc. | 9,588,915 | ||||||
126,865 | Red Hat, Inc.* | 15,236,486 | ||||||
105,538 | salesforce.com, Inc.* | 10,789,150 | ||||||
55,938 | Tyler Technologies, Inc.* | 9,903,823 | ||||||
200,534 | Visa, Inc. | 22,864,887 | ||||||
178,265,830 | ||||||||
Materials — 5.7% | ||||||||
345,793 | Ball Corp. | 13,088,265 | ||||||
114,022 | Ecolab, Inc. | 15,299,472 | ||||||
28,387,737 | ||||||||
Total Common Stocks (Cost $286,893,433) | 449,351,564 | |||||||
Real Estate Investment Trusts — 4.4% | ||||||||
153,578 | American Tower Corp. | 21,910,973 | ||||||
Total Real Estate Investment Trusts (Cost $15,837,180) | 21,910,973 | |||||||
Short-Term Investments — 5.7% | ||||||||
Money Market Funds — 5.7% | ||||||||
28,558,933 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 28,558,933 | |||||||
Total Short-Term Investments (Cost $28,558,933) | 28,558,933 | |||||||
Total Investments — 100.4% (Cost $331,289,546) | 499,821,470 | |||||||
Liabilities in Excess of Other Assets — (0.4)% | (2,104,765 | ) | ||||||
NET ASSETS — 100.0% | $ | 497,716,705 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Information Technology | 35.8 | % | ||
Health Care | 18.8 | % | ||
Industrials | 18.1 | % | ||
Consumer Discretionary | 9.5 | % | ||
Money Market Funds | 5.7 | % | ||
Materials | 5.7 | % | ||
Real Estate Investment Trusts | 4.4 | % | ||
Consumer Staples | 2.4 | % | ||
Other Assets and Liabilities | (0.4 | )% | ||
100.0 | % |
ADR — American Depositary Receipt | ||
* | Non-Income Producing | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
12
Brown Advisory Mid-Cap Growth Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the period since inception, from October 2, 2017 to December 31, 2017, the Brown Advisory Mid-Cap Growth Fund (the “Fund”) returned 2.80% in value. During the same period, the Russell Midcap Growth Index (the “Index”), the Fund’s benchmark, increased 6.27%.
For context, here is a quick summary of our approach. The Fund’s strategy sprung from our Small-Cap Growth Fund’s strategy. It is run by the same team, using the same philosophy and process. Our goal is to outperform over a multiyear period through stock selection. We believe that low turnover, high active share and prudent concentration are keys to long-term success. We are valuation-sensitive and not momentum investors. Our bottom-up, fundamental, “3G” (growth, governance and go-to-market strategy) approach typically leads us to what we believe to be higher-quality companies. That tilts us away from retail/apparel, commodity-oriented and cyclical companies.
So what happened since the Fund’s inception? The Index climbed 6.27%. An upmarket, in and of itself, is not a good predictor of our relative returns. The difference this past quarter was persistence. Volatility was historically low during the period with an unusually low number of days in which the Index declined. These conditions left fewer opportunities to for the Fund to benefit from its positioning which we believe has the potential to offer downside protection.
Moreover, large caps meaningfully outpaced small caps. In fact, the Russell 1000® Growth Index outstripped its small-cap counterpart by more than 3% in the fourth quarter. Due to its heritage, the Fund sports a lower weighted-average market cap than its benchmark. While we believe the effect abates over longer periods, we suspect this market cap bias effects our relative performance during short periods. We believe this dampened our Index-relative returns in the fourth quarter.
What drove such consistent gains in the benchmark? Industrials, materials, energy and consumer companies. Zooming in further, the top-three Index sub-sectors were retail, mining and investment banks/brokers. We are underweight those companies in comparison to the Index; we believe that provided another headwind in the fourth quarter.
Put simply, the market seemed to reward larger, more cyclical companies than we typically own during the fourth quarter. While we believe that provided a headwind to our relative results, our top-three detractors also hurt, accounting for nearly half of our Index-relative shortfall.
MACOM Technology Solutions Inc. reduced guidance significantly twice in the second half of the year due to weakness in China. Unlike the first miss in August, its third quarter report in November also showed signs of weakness in data center sales—its main growth driver—causing us to reassess the position. TripAdvisor Inc. struggled with a business model transition over the last two years. To make matters worse, Priceline reduced its advertising spend on hotel metasearch auctions, hindering TripAdvisor’s results further in the second half of 2017. Henry Schein, Inc.’s share price faltered as fears of Amazon’s encroachment into the dental consumables distribution space burgeoned. We think investor concerns are overblown; we added to the position on weakness.
Since the Fund’s inception, we added two new positions and sold three. We built a position in Cambrex Corporation, a leading contract manufacturer of pharmaceuticals, for two reasons: 1) we think secular trends favor outsourcing; and 2) investor concerns over the firm’s revenue concentration with Gilead may be overblown; we believe that this created an attractive entry point. We think GoDaddy, Inc. has developed a unique and enduring platform to sell IT products to small businesses. While its mainstay internet domain registration business drives what has been modest-but-steady growth, we think the firm has the potential to continue to cross-sell website hosting and development services, Office 365 and telephony services at a faster pace. We also see it potentially benefitting from scale outside the U.S. following its acquisition of Host Europe Group (HEG) in Europe.
Becton Dickenson and Co announced it would acquire C.R. Bard, Inc. earlier in the year. We sold the position to fund other opportunities. We sold Equifax Inc. because we believe the company’s recovery from a massive data breech will be protracted and expensive. We still own a meaningful position in Equifax’s competitor—TransUnion. We exited our position in TreeHouse Foods, Inc. early in the fourth quarter due to fundamental concerns and avoided further losses after the company reported soft third quarter results. We think TreeHouse will continue to struggle integrating ConAgra Brands Inc.’s private brands business, which it purchased in 2016.
13
Brown Advisory Mid-Cap Growth Fund
A Message to Our Shareholders
December 31, 2017
As always, we remain committed to achieving what we believe to be attractive risk-adjusted returns over a full market cycle by owning a diversified portfolio of companies that we believe could one day grow much larger. We are grateful for your support and look forward to updating you in six months.
Sincerely,
George J. Sakellaris
Portfolio Manager
Christopher A. Berrier
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.
14
Brown Advisory Mid-Cap Growth Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 77.2% | ||||||||
Consumer Discretionary — 17.7% | ||||||||
1,168 | Bright Horizons Family Solutions, Inc.* | 109,792 | ||||||
979 | CarMax, Inc.* | 62,783 | ||||||
189 | Chipotle Mexican Grill, Inc.* | 54,627 | ||||||
4,782 | Cotiviti Holdings, Inc.* | 154,028 | ||||||
1,152 | Ctrip.com International, Ltd. ADR* | 50,803 | ||||||
789 | FleetCor Technologies, Inc.* | 151,827 | ||||||
5,208 | Genpact, Ltd. | 165,301 | ||||||
2,131 | Liberty Formula One* | 69,726 | ||||||
1,768 | Liberty SiriusXM* | 70,119 | ||||||
1,515 | Marriott International, Inc. | 205,631 | ||||||
521 | PriceSmart, Inc. | 44,858 | ||||||
1,705 | Ross Stores, Inc. | 136,827 | ||||||
836 | SiteOne Landscape Supply, Inc.* | 64,121 | ||||||
3,204 | TransUnion* | 176,092 | ||||||
2,825 | TripAdvisor, Inc.* | 97,350 | ||||||
1,613,885 | ||||||||
Consumer Staples — 3.5% | ||||||||
1,894 | Brown-Forman Corp. | 130,061 | ||||||
1,925 | Church & Dwight Co., Inc. | 96,577 | ||||||
694 | Estee Lauder Companies, Inc. | 88,305 | ||||||
314,943 | ||||||||
Financials — 2.1% | ||||||||
1,026 | Prosperity Bancshares, Inc. | 71,892 | ||||||
2,099 | Webster Financial Corp. | 117,880 | ||||||
189,772 | ||||||||
Health Care — 11.0% | ||||||||
584 | Agios Pharmaceuticals, Inc.* | 33,387 | ||||||
1,768 | Alder Biopharmaceuticals, Inc.* | 20,244 | ||||||
1,562 | Cambrex Corp.* | 74,976 | ||||||
4,498 | Catalent, Inc.* | 184,778 | ||||||
1,168 | Charles River Laboratories International, Inc.* | 127,838 | ||||||
537 | Cooper Companies, Inc. | 117,002 | ||||||
1,278 | DexCom, Inc.* | 73,344 | ||||||
1,484 | Edwards Lifesciences Corp.* | 167,262 | ||||||
2,131 | Henry Schein, Inc.* | 148,914 | ||||||
584 | Neurocrine Biosciences, Inc.* | 45,312 | ||||||
284 | Ultragenyx Pharmaceutical, Inc.* | 13,172 | ||||||
1,006,229 | ||||||||
Industrials — 11.7% | ||||||||
663 | Allegion PLC | 52,748 | ||||||
1,531 | BWX Technologies, Inc. | 92,610 | ||||||
1,010 | ESCO Technologies, Inc. | 60,853 | ||||||
1,389 | HEICO Corp. | 131,052 | ||||||
1,925 | Hexcel Corp. | 119,061 | ||||||
742 | IDEX Corp. | 97,922 | ||||||
789 | J.B. Hunt Transport Services, Inc. | 90,719 | ||||||
4,056 | Waste Connections, Inc. | 287,733 | ||||||
1,720 | Woodward, Inc. | 131,649 | ||||||
1,064,347 | ||||||||
Information Technology — 24.6% | ||||||||
3,220 | Acxiom Corp.* | 88,743 | ||||||
1,152 | Amphenol Corp. | 101,146 | ||||||
268 | ANSYS, Inc.* | 39,554 | ||||||
805 | Blackbaud, Inc. | 76,064 | ||||||
1,910 | Broadridge Financial Solutions, Inc. | 173,009 | ||||||
2,762 | BroadSoft, Inc.* | 151,633 | ||||||
2,194 | Cavium, Inc.* | 183,924 | ||||||
1,263 | CoreLogic, Inc.* | 58,363 | ||||||
1,278 | Electronic Arts, Inc.* | 134,266 | ||||||
379 | Fair Isaac Corp. | 58,063 | ||||||
616 | Gartner, Inc.* | 75,860 | ||||||
726 | Global Payments, Inc. | 72,774 | ||||||
1,925 | GoDaddy, Inc.* | 96,789 | ||||||
1,231 | Guidewire Software, Inc.* | 91,414 | ||||||
742 | Intuit, Inc. | 117,073 | ||||||
852 | Jack Henry & Associates, Inc. | 99,650 | ||||||
1,578 | MACOM Technology Solutions Holdings, Inc.* | 51,348 | ||||||
1,073 | MAXIMUS, Inc. | 76,805 | ||||||
1,405 | Microchip Technology, Inc. | 123,471 | ||||||
4,119 | Mimecast, Ltd.* | 118,092 | ||||||
1,752 | Sensata Technologies Holding NV* | 89,545 | ||||||
1,673 | Vantiv, Inc.* | 123,049 | ||||||
410 | WEX, Inc.* | 57,904 | ||||||
2,258,539 | ||||||||
Materials — 4.0% | ||||||||
4,545 | Ball Corp. | 172,028 | ||||||
1,436 | Ecolab, Inc. | 192,683 | ||||||
364,711 | ||||||||
Telecommunication Services — 2.6% | ||||||||
3,014 | Cogent Communications Holdings, Inc. | 136,534 | ||||||
1,215 | Liberty Broadband Corp.* | 103,336 | ||||||
239,870 | ||||||||
Total Common Stocks (Cost $6,968,693) | 7,052,296 | |||||||
Real Estate Investment Trusts — 2.3% | ||||||||
552 | Crown Castle International Corp. | 61,278 | ||||||
884 | SBA Communications Corp.* | 144,410 | ||||||
Total Real Estate Investment Trusts (Cost $202,454) | 205,688 | |||||||
Short-Term Investments — 15.4% | ||||||||
Money Market Funds — 15.4% | ||||||||
1,406,639 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 1,406,639 | |||||||
Total Short-Term Investments (Cost $1,406,639) | 1,406,639 | |||||||
Total Investments — 94.9% (Cost $8,577,786) | 8,664,623 | |||||||
Other Assets in Excess of Liabilities — 5.1% | 464,091 | |||||||
NET ASSETS — 100.0% | $ | 9,128,714 |
The accompanying notes are an integral part of these financial statements.
15
Brown Advisory Mid-Cap Growth Fund
Schedule of Investments
December 31, 2017 (Unaudited)
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Information Technology | 24.6 | % | ||
Consumer Discretionary | 17.7 | % | ||
Money Market Funds | 15.4 | % | ||
Industrials | 11.7 | % | ||
Health Care | 11.0 | % | ||
Materials | 4.0 | % | ||
Consumer Staples | 3.5 | % | ||
Telecommunication Services | 2.6 | % | ||
Real Estate Investment Trusts | 2.3 | % | ||
Financials | 2.1 | % | ||
Other Assets and Liabilities | 5.1 | % | ||
100.0 | % |
ADR — American Depositary Receipt | ||
* | Non-Income Producing | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
16
Brown Advisory Small-Cap Growth Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Small-Cap Growth Fund Investor Shares (the “Fund”) increased 7.22% in value. During the same period, the Russell 2000® Growth Index, the Fund’s benchmark, increased 11.09%.
Our approach has been very consistent over almost a dozen years. We strive to produce attractive risk-adjusted returns over a full market cycle through long-term security selection and attempting to mitigate downside risk through portfolio diversification, quality and valuation sensitivity. Generally, we have found our path to be effective. At times, however, we have been challenged to keep pace with the most vigorous of “risk-on” trades by our benchmark, particularly when the drivers of these rallies lie away from our philosophical approach. If momentum, loss makers and/or more commodity-oriented businesses drive returns, we need nearly perfect stock selection as an offset. Unfortunately, this was the environment in which the portfolio found itself during the latter stages of 2017 and we were certainly nowhere near perfect.
Specifically in November 2017, the strategy experienced a handful of lackluster third quarter earnings reports that arrested the momentum of the portfolio against a backdrop of increasing momentum in the market. Thus, a solid year of nearly matching the benchmark—with lower beta and volatility—ended in disappointment. We finished the year with another round of what we believed to be solid absolute returns, but fell short of our relative bogey.
This brings us to some thoughts on the present operating environment. We know that equity valuations are high and volatility levels remain at extremely low levels. However, we do not control the opportunity set, just our investment process. As equity prices have marched higher, our response to the environment has simply been to work harder to uncover new ideas that we believe trade at attractive entry points. During the period we added 10 new ideas, achieving some fruits from our labor. But, the prime benefit of this work is a more marked expansion of our library of knowledge against our investable universe. Frustratingly, the lack of any type of meaningful pullback in the market and its increasing momentum orientation has precluded us from acting on more of this body of work. Our new ideas have largely been a function of idiosyncratic vs. widespread opportunity. We mention these facts because one of the reasons we have been able to manage the strategy with solid downside capture–while still providing reasonable long-term upside capture–is our pattern of activity during market turbulence. We are of the view that downside capture is critical because it not only allows for potential outperformance during difficult times, but provides the mental wherewithal to become a little greedier when others are slightly more fearful. Over the years, this discipline has likely added more value than any other aspect of our philosophy and process in our pursuit of attractive, long-term risk-adjusted returns. We know we cannot predict volatility, but we will always strive to be as prepared for it as possible.
From an individual stock perspective, there was no apparent theme to the top-five contributors during the period. BeiGene, a biopharmaceutical company that discovers and develops targeted drugs for the treatment of cancer, demonstrated substantive clinical progress over the course of 2017. The company has enjoyed a strong position in its home market (China) and has expanded its opportunity set overseas through its partnership with Celgene. BroadSoft, which provides software and services that have enabled telecommunications service providers to deliver hosted cloud-based unified communications (UC) to their enterprise customers, was another top contributor. Broadsoft was acquired by Cisco during the fourth quarter in an all-cash transaction valued at $1.9 billion. The stock had risen prior to the announcement on speculation of a deal. Cavium, Inc. is a provider of integrated semiconductor processors that enable intelligent processing for wired and wireless infrastructure and cloud networking, communications, storage and security applications. Its share price rose 27% in the fourth quarter of 2017 after the company reported better-than-expected earnings and also raised guidance. Following earnings, the company was acquired in a cash and stock deal by Marvell at a healthy premium–particularly if the acquirer continues to rally on the proposed synergies of the transaction. HEICO Corporation is a leading supplier of aftermarket commercial aerospace parts. The company’s practice of meaningfully undercutting the original equipment manufacturers’ pricing has made the business a wonderful compounder over time, in our view. While we are mindful that several recent solid quarterly reports has pushed the stock’s valuation to new highs, we acknowledge that tax reform is meaningfully positive to free cash flow and that the management team has executed on numerous highly attractive acquisitions in the past; these usually help cure issues around short-term valuation. Bright Horizon Family Solutions, a provider of childcare, early education and other services for employers and families, reported strong third quarter results as the company commands strong pricing power and shows operating leverage in its model.
Most of the bottom detractors during the six month period were due to lackluster third quarter earnings. MACOM Technology, a manufacturer of analog radio frequency (RF), microwave, millimeterwave and photonic semiconductor solutions, released third quarter earnings results and guidance that disappointed due to an abrupt and continued pause in Chinese demand. Habit
17
Brown Advisory Small-Cap Growth Fund
A Message to Our Shareholders
December 31, 2017
Restaurants, a small position, operates fast-casual restaurants under The Habit Burger Grill name, reported second quarter results that further highlighted the difficult operating climate faced by numerous restaurants and retail businesses. Henry Schein, a provider of health care products and services to dental practitioners and laboratories, animal health clinics, physician practices, government, institutional health care clinics and other alternate care clinics worldwide, fell victim to rising concerns that Amazon was going to become a greater competitive threat in the profitable dental consumables franchise. While we believe there are multiple reasons why the perceived threat by Amazon is greater than the actual threat, the recent market pattern of companies facing competition from Amazon has been to remain weak until future results prove otherwise. Medidata provides cloud-based solutions for life sciences worldwide. Its Medidata Clinical Cloud offering provides a software-as-a-service platform to optimize clinical development activity. The company’s shares fell as third quarter revenues and fourth quarter revenue guidance were slightly below consensus. For each of these companies, we will analyze our investment thesis, the risk/reward, and other opportunities to determine whether the position sizes are sold, trimmed, or increased.
As mentioned previously, we believe volatility will emerge over time. We have what we believe are many high-quality companies in which we are eager to invest…at the right price. By maintaining a strong team, sound process and deep list of well-researched smaller companies, we strive to generate solid absolute and relative results over the long-term.
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. Earnings growth is not representative of the fund’s future performance. Diversification does not assure a profit, nor does it protect against a loss in a declining market. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater for investments in emerging markets. Privately Placement issued securities are restricted securities that are not publicly traded. Delay or difficulty in selling such securities may result in a loss to the Fund.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
18
Brown Advisory Small-Cap Growth Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 93.9% | ||||||||
Consumer Discretionary — 19.4% | ||||||||
257,726 | Bright Horizons Family Solutions, Inc.* | 24,226,244 | ||||||
669,514 | Carrols Restaurant Group, Inc.* | 8,134,595 | ||||||
284,939 | Clarus Corp.* | 2,236,771 | ||||||
345,389 | Core-Mark Holding Co., Inc. | 10,907,385 | ||||||
476,890 | Cotiviti Holdings, Inc.* | 15,360,627 | ||||||
664,218 | Genpact, Ltd. | 21,082,279 | ||||||
538,571 | Habit Restaurants, Inc.* | 5,143,353 | ||||||
299,082 | Liberty Formula One* | 9,785,963 | ||||||
1,181,193 | Liberty TripAdvisor Holdings, Inc.* | 11,132,744 | ||||||
265,864 | Liberty Ventures* | 14,420,463 | ||||||
367,657 | Lindblad Expeditions Holdings, Inc.* | 3,599,362 | ||||||
142,030 | MakeMyTrip, Ltd.* | 4,239,595 | ||||||
92,877 | PriceSmart, Inc. | 7,996,710 | ||||||
128,951 | SiteOne Landscape Supply, Inc.* | 9,890,542 | ||||||
148,156,633 | ||||||||
Consumer Staples — 1.5% | ||||||||
102,195 | Casey’s General Stores, Inc. | 11,439,708 | ||||||
Financials — 7.2% | ||||||||
382,380 | BankUnited, Inc. | 15,570,514 | ||||||
334,162 | ConnectOne Bancorp, Inc. | 8,604,671 | ||||||
146,708 | Envestnet, Inc.* | 7,313,394 | ||||||
131,423 | Prosperity Bancshares, Inc. | 9,208,810 | ||||||
249,677 | Webster Financial Corp. | 14,021,860 | ||||||
54,719,249 | ||||||||
Health Care — 14.2% | ||||||||
126,992 | Acceleron Pharma, Inc.* | 5,389,541 | ||||||
78,461 | Agios Pharmaceuticals, Inc.* | 4,485,615 | ||||||
255,556 | Alder Biopharmaceuticals, Inc.* | 2,926,116 | ||||||
18,182 | AnaptysBio, Inc.* | 1,831,291 | ||||||
75,267 | BeiGene, Ltd. ADR* | 7,355,091 | ||||||
232,566 | Cambrex Corp.* | 11,163,168 | ||||||
532,691 | Catalent, Inc.* | 21,882,946 | ||||||
170,528 | Charles River Laboratories International, Inc.* | 18,664,290 | ||||||
186,004 | Coherus BioSciences, Inc.* | 1,636,835 | ||||||
138,886 | Henry Schein, Inc.* | 9,705,354 | ||||||
16,474 | IDEXX Laboratories, Inc.* | 2,576,204 | ||||||
131,289 | Jounce Therapeutics, Inc.* | 1,673,935 | ||||||
144,055 | Medidata Solutions, Inc.* | 9,128,765 | ||||||
74,876 | Neurocrine Biosciences, Inc.* | 5,809,629 | ||||||
93,838 | Ultragenyx Pharmaceutical, Inc.* | 4,352,206 | ||||||
108,580,986 | ||||||||
Industrials — 19.8% | ||||||||
124,747 | BWX Technologies, Inc. | 7,545,946 | ||||||
249,510 | ESCO Technologies, Inc. | 15,032,977 | ||||||
274,354 | Healthcare Services Group, Inc. | 14,463,943 | ||||||
134,199 | HEICO Corp. | 12,661,676 | ||||||
258,370 | Hexcel Corp. | 15,980,184 | ||||||
89,271 | IDEX Corp. | 11,781,094 | ||||||
312,676 | Knight-Swift Transportation Holdings, Inc. | 13,670,195 | ||||||
75,645 | Mercury Systems, Inc.* | 3,884,371 | ||||||
77,871 | WageWorks, Inc.* | 4,828,002 | ||||||
475,607 | Waste Connections, Inc. | 33,739,561 | ||||||
86,673 | Welbilt, Inc.* | 2,037,682 | ||||||
212,726 | Woodward, Inc. | 16,282,048 | ||||||
151,907,679 | ||||||||
Information Technology — 29.3% | ||||||||
93,774 | 2U, Inc.* | 6,049,361 | ||||||
423,295 | Acxiom Corp.* | 11,666,010 | ||||||
144,143 | Alarm.com Holdings, Inc.* | 5,441,398 | ||||||
96,006 | Appian Corp.* | 3,022,269 | ||||||
191,559 | Aspen Technology, Inc.* | 12,681,206 | ||||||
167,193 | Blackbaud, Inc. | 15,798,066 | ||||||
164,937 | Blackline, Inc.* | 5,409,934 | ||||||
216,324 | Broadridge Financial Solutions, Inc. | 19,594,628 | ||||||
464,213 | BroadSoft, Inc.* | 25,485,294 | ||||||
262,163 | Cavium, Inc.* | 21,977,124 | ||||||
138,335 | CoreLogic, Inc.* | 6,392,460 | ||||||
83,140 | Fair Isaac Corp. | 12,737,048 | ||||||
36,472 | Global Payments, Inc. | 3,655,953 | ||||||
123,995 | Guidewire Software, Inc.* | 9,207,869 | ||||||
17,474 | Littelfuse, Inc. | 3,456,707 | ||||||
172,190 | MACOM Technology Solutions Holdings, Inc.* | 5,603,063 | ||||||
179,517 | MAXIMUS, Inc. | 12,849,827 | ||||||
518,549 | Mimecast, Ltd.* | 14,866,800 | ||||||
94,221 | Paylocity Holding Corp.* | 4,443,462 | ||||||
67,153 | Proofpoint, Inc.* | 5,963,858 | ||||||
42,701 | Ultimate Software Group, Inc.* | 9,318,639 | ||||||
63,828 | WEX, Inc.* | 9,014,428 | ||||||
224,635,404 | ||||||||
Telecommunication Services — 2.5% | ||||||||
376,954 | Cogent Communications Holdings, Inc. | 17,076,016 | ||||||
1,003,398 | Global Eagle Entertainment, Inc.* | 2,297,782 | ||||||
19,373,798 | ||||||||
Total Common Stocks (Cost $549,370,439) | 718,813,457 | |||||||
Private Placements — 0.3% | ||||||||
18,800 | Greenspring Global Partners IV-B, L.P.*^† | 2,341,190 | ||||||
88,769 | Greenspring Global Partners V-B, L.P.*~† | 107,640 | ||||||
Total Private Placements (Cost $18,019) | 2,448,830 | |||||||
Contingent Value Rights — 0.0% | ||||||||
118,191 | Dyax Corp.*† (Acquired in January 2016) | 131,192 | ||||||
Total Contingent Value Rights (Cost $131,192) | 131,192 |
The accompanying notes are an integral part of these financial statements.
19
Brown Advisory Small-Cap Growth Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Short-Term Investments — 6.5% | ||||||||
Money Market Funds — 6.5% | ||||||||
49,685,917 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 49,685,917 | |||||||
Total Short-Term Investments (Cost $49,685,917) | 49,685,917 | |||||||
Total Investments — 100.7% (Cost $599,205,567) | 771,079,396 | |||||||
Liabilities in Excess of Other Assets — (0.7)% | (5,113,374 | ) | ||||||
NET ASSETS — 100.0% | $ | 765,966,022 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Information Technology | 29.3 | % | ||
Industrials | 19.8 | % | ||
Consumer Discretionary | 19.4 | % | ||
Health Care | 14.2 | % | ||
Financials | 7.2 | % | ||
Money Market Funds | 6.5 | % | ||
Telecommunication Services | 2.5 | % | ||
Consumer Staples | 1.5 | % | ||
Private Placements | 0.3 | % | ||
Contingent Value Rights | 0.0 | % | ||
Other Assets and Liabilities | (0.7 | )% | ||
100.0 | % |
ADR — American Depositary Receipt | ||
* | Non-Income Producing | |
^ | Security is exempt from registration under Regulation D of the Securities Act of 1933. Security was acquired from February 2008 to August 2016 as part of a $2,000,000 capital commitment. At December 31, 2017, $1,880,000 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 November 2017 as part of a $100,000 capital commitment. At December 31, 2017, $88,000 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, 2017 the total market value of securities considered illiquid was $2,580,022 or 0.3% of net assets. | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
20
Brown Advisory Small-Cap Fundamental Value Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Small-Cap Fundamental Value Fund Investor Shares (the “Fund”) increased 9.34% in value. During the same period, the Russell 2000® Value Index (the “Index”), the Fund’s benchmark, increased 7.26%
After a lackluster start in 2017, small-cap stocks rebounded during the last several months of the year. In particular, both positive fundamental results within cyclical sectors and the anticipation (and eventual passage) of the tax overhaul drove the rally.
McGrath RentCorp was the Fund’s largest contributor to performance during the six-month period. Both macro and micro accelerations in the period benefitted McGrath. The underlying demand environment from municipalities and construction companies grew for their portable office solutions, and the company saw meaningful impact from internal efforts to drive better profitability. The combination of the two tailwinds helped drive profits and growth above expectations, which we believe sets them up well for 2018 and beyond. Primerica, another top performer, benefitted from an improving regulatory backdrop in Washington, particularly around the DOL Fiduciary Rule. Strong fundamental performance combined with continued capital return has also pushed consensus estimates up gradually throughout the year. Lastly, Albany International performed well during the year and remains a large position. The company has shown sound execution in preparing its Engineered Components business for the anticipated steep production ramp of the new LEAP engines in the back half of 2017 and into 2018. This performance translated into better-than-expected results and management raised its revenue outlook for this division throughout the year. The company’s paper machine clothing division continues to take share and hold price in an improving market. We believe the outlook for both businesses remains favorable heading into 2018.
The largest detractor from performance was ATN International. In the first quarter of the year, ATN International fell on the expiration of some U.S. renewable credits and modest delays in its renewable projects in India. The company’s U.S. and international telecom businesses performed as expected. In the third quarter, ATN International cut its dividend in half. Despite $250M in gross cash on the balance sheet ($100M net) and expected free cash flow in 2018 that was two-to-three times the prior dividend, ATN wanted to further increase capital allocation flexibility for internal investment, mergers & acquisitions and stock repurchases. During the fall, the company lowered 2017 EBITDA expectations due to the company’s telecom presence in areas affected by hurricanes Irma and José, most notably the U.S. Virgin Islands. Throughout the year, we cut our position in the stock to <1%. Colony Northstar, another detractor to performance, saw weakness following a third-quarter earnings release that fell below consensus expectations. Additional management commentary prompted downward revisions to forward estimates. Altisource Residential stock fell during the period following news that Hurricane Harvey was to make landfall in the United States, followed soon by Hurricane Irma. Approximately 20% of the company’s rental home portfolio is located either in Houston or Florida.
The Fund added six names during the six-month period, including: BankUnited, DSW Inc., and REX American Resources.
BankUnited is a Florida-headquartered bank that is beginning to hit an inflection point in earnings following nearly five years of little-to-no net bottom-line growth. The company has a history of robust organic loan growth that has been muted by the run-off of a large FDIC-covered portfolio, which has made it difficult to grow earnings simultaneously. With the loss share expiring in 2019 (and the P&L impact diminishing every quarter), we believe the potential exists for investors to begin to understand the true earnings potential of the company and the stock may re-rate higher. Due to the confusing accounting surrounding the loss share, the stock has traded at only 1.4x Tangible Book Value (“TBV”) and 15x core projected 2018 Earnings Per Share (“EPS”), below the Southeast peer average of 2.0x TBV and 15.9x projected 2018 EPS. While our thesis does not hinge on a merger or acquisition, we believe that poor investor perception around the stock sets BankUnited up to be an attractive acquisition candidate for a larger bank looking to expand their Florida footprint. After several recent competitor acquisitions, BankUnited is the only remaining franchise of size that is independent in Florida. While we wait for either outcome, we believe that our downside is supported by a 2.5% dividend yield.
DSW is an off-price retailer of footwear and accessory brands that sells through over 500 retail stores and online. While the challenges of brick and mortar retail and the omnipresent threat of Amazon (Zappos) are well known, we believe DSW presents a compelling investment opportunity. Although DSW’s business has been impacted by retail secular issues, this is reflected in its low valuation (~4x EBITDA) and we believe the business has shown early signs of stabilization in key metrics: same store sales, profitability per square foot and inventory control. Further, the company has reduced store growth targets, almost entirely invested in the build-out of its omni-channel capabilities, and is now producing high levels of free cash flow (~8% FCF yield). DSW’s balance sheet and capital allocation policies are strong, with a net cash position and a $500M share repurchase authorization on a $1.7B market cap company. The company also has paid a quarterly dividend has yielded close to 4%. We believe the near-term scenario for the company is attractive; if early 2018 reports beat current consensus estimates, it could lead to a re-rating of DSW shares.
21
Brown Advisory Small-Cap Fundamental Value Fund
A Message to Our Shareholders
December 31, 2017
REX American Resources (“REX”) has ownership stakes in six leading ethanol production facilities in the Midwest. Despite the underlying volatility of the price of ethanol as well as its largest input prices (corn and natural gas), REX has generated positive free cash flow every year since 2011. It has consistently shown that it has some of the most efficient, lowest-cost plants in the U.S., and the recent weakness in ethanol pricing gave us an opportunity to purchase these assets well below replacement cost. We think the outlook for ethanol remains favorable and should be supported by continued strength in the export market, as countries like China and India look to expand their biofuel mandates. We expect REX’s free cash flow to accelerate in 2018 as the company completes its final capacity expansions at its two consolidated facilities. We expect capital expenditures could fall by 60% in 2018 and ethanol production could increase over 10% from 2016 levels. REX has a strong history of returning cash to shareholders with total shares outstanding reduced by 25% since 2011 and by 64% since 2001.
Over the six-month period, there were seven sales from investments within the Fund, including: The Capital Bancorp, State National, and Digital Globe due to closed M&A transactions.
We sold our investment in Oritani, as the company reached our price target and successfully completed the last sale of its real estate joint venture portfolio. The value of these joint ventures was material, but was recorded on the balance at cost. Thus as they were liquidated, the gains significantly increased Oritani’s book value. We have also grown increasingly concerned about credit risks in the Northeastern multi-family loan market. While we have not seen any direct indications of trouble in Oritani’s portfolio, we have noted other regional lenders starting to experience issues. Additionally, Cars.com was spun out of Tegna, a current position. We sold Carriage Services due to valuation and concern about the company’s strategic goals. We sold out of our Hawaiian Telcom investment after the company entered into a definitive agreement to be acquired by Cincinnati Bell (CBB) for $30.75, with a targeted 60%/40% cash/stock split.
While valuations are high for the market overall, we are excited about our pipeline due to the wide dispersion of results throughout the year and the variation of valuations that this has created.
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. Earnings growth is not a measure of the Fund’s future performance.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
22
Brown Advisory Small-Cap Fundamental Value Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 86.9% | ||||||||
Consumer Discretionary — 16.7% | ||||||||
238,499 | Cato Corp. | 3,796,904 | ||||||
649,915 | Core-Mark Holding Co., Inc. | 20,524,316 | ||||||
108,193 | Culp, Inc. | 3,624,466 | ||||||
1,945,907 | Denny’s Corp.*† | 25,763,809 | ||||||
698,528 | DSW, Inc. | 14,955,485 | ||||||
334,487 | Liberty Ventures* | 18,142,575 | ||||||
386,588 | Loral Space & Communications, Inc.*† | 17,029,201 | ||||||
425,115 | Murphy USA, Inc.* | 34,162,241 | ||||||
505,847 | Nexstar Broadcasting Group, Inc. | 39,557,235 | ||||||
1,478,481 | Regis Corp.*† | 22,709,468 | ||||||
1,201,938 | TEGNA, Inc. | 16,923,287 | ||||||
217,188,987 | ||||||||
Consumer Staples — 1.0% | ||||||||
120,634 | Casey’s General Stores, Inc. | 13,503,770 | ||||||
Energy — 5.7% | ||||||||
1,175,448 | Linn Energy, Inc.* | 47,311,782 | ||||||
112,400 | Natural Gas Services Group, Inc.* | 2,944,880 | ||||||
959,326 | Par Pacific Holdings, Inc.* | 18,495,805 | ||||||
63,621 | REX American Resources Corp.* | 5,267,183 | ||||||
74,019,650 | ||||||||
Financials — 28.1% | ||||||||
1,411,416 | Ares Capital Corp. | 22,187,460 | ||||||
304,983 | Assurant, Inc. | 30,754,486 | ||||||
787,685 | BankUnited, Inc. | 32,074,533 | ||||||
145,885 | Farmers Capital Bank Corp.† | 5,616,573 | ||||||
164,802 | First Horizon National Corp. | 3,294,393 | ||||||
220,304 | Howard Bancorp, Inc.*† | 4,846,688 | ||||||
848,189 | McGrath RentCorp† | 39,847,919 | ||||||
359,198 | Medley Management, Inc.† | 2,334,787 | ||||||
723,672 | National Bank Holdings Corp.† | 23,468,683 | ||||||
1,010,639 | National General Holdings Corp. | 19,848,950 | ||||||
537,349 | OceanFirst Financial Corp. | 14,105,411 | ||||||
289,028 | Pacific Premier Bancorp, Inc.* | 11,561,120 | ||||||
408,279 | Primerica, Inc. | 41,460,732 | ||||||
338,171 | Renasant Corp. | 13,827,812 | ||||||
747,668 | Synovus Financial Corp. | 35,843,204 | ||||||
1,158,086 | TFS Financial Corp. | 17,301,805 | ||||||
292,859 | TriState Capital Holdings, Inc.* | 6,735,757 | ||||||
264,311 | Triumph Bancorp, Inc.* | 8,325,797 | ||||||
288,288 | Virtus Investment Partners, Inc. | 33,167,534 | ||||||
366,603,644 | ||||||||
Health Care — 1.9% | ||||||||
95,971 | Addus HomeCare Corp.* | 3,339,791 | ||||||
364,437 | Providence Service Corp.* | 21,625,691 | ||||||
24,965,482 | ||||||||
Industrials — 16.1% | ||||||||
1,015,902 | Albany International Corp.† | 62,427,178 | ||||||
1,092,089 | Continental Building Products, Inc.* | 30,742,305 | ||||||
280,034 | EnPro Industries, Inc. | 26,185,979 | ||||||
951,179 | Federal Signal Corp. | 19,109,186 | ||||||
314,084 | Kadant, Inc. | 31,534,034 | ||||||
75,355 | KMG Chemicals, Inc. | 4,979,459 | ||||||
599,734 | Simpson Manufacturing Co., Inc. | 34,430,729 | ||||||
209,408,870 | ||||||||
Information Technology — 10.2% | ||||||||
200,200 | Broadridge Financial Solutions, Inc. | 18,134,116 | ||||||
934,006 | CTS Corp.† | 24,050,654 | ||||||
223,172 | DST Systems, Inc. | 13,852,286 | ||||||
922,597 | EchoStar Corp.*† | 55,263,560 | ||||||
306,877 | MAXIMUS, Inc. | 21,966,256 | ||||||
133,266,872 | ||||||||
Materials — 5.4% | ||||||||
294,315 | Clearwater Paper Corp.* | 13,361,901 | ||||||
396,170 | Deltic Timber Corp. | 36,269,363 | ||||||
225,306 | Neenah Paper, Inc. | 20,423,989 | ||||||
70,055,253 | ||||||||
Real Estate — 0.3% | ||||||||
7,358 | Consolidated-Tomoka Land Co. | 467,233 | ||||||
177,624 | Landmark Infrastructure Partners L.P. | 3,214,994 | ||||||
3,682,227 | ||||||||
Telecommunication Services — 1.0% | ||||||||
227,338 | ATN International, Inc. | 12,562,698 | ||||||
Utilities — 0.5% | ||||||||
657,846 | Star Group L.P.† | 7,071,845 | ||||||
Total Common Stocks (Cost $785,240,117) | 1,132,329,298 | |||||||
Real Estate Investment Trusts — 10.1% | ||||||||
1,878,423 | Altisource Residential Corp.† | 22,278,097 | ||||||
2,278,473 | Colony NorthStar, Inc. | 25,997,377 | ||||||
1,761,255 | Forest City Realty Trust, Inc. | 42,446,245 | ||||||
3,290,290 | MFA Financial, Inc. | 26,059,097 | ||||||
728,185 | Xenia Hotels & Resorts, Inc. | 15,721,514 | ||||||
Total Real Estate Investment Trusts (Cost $120,973,300) | 132,502,330 | |||||||
Short-Term Investments — 2.7% | ||||||||
Money Market Funds — 2.7% | ||||||||
34,779,281 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 34,779,281 | |||||||
Total Short-Term Investments (Cost $34,779,281) | 34,779,281 | |||||||
Total Investments — 99.7% (Cost $940,992,698) | 1,299,610,909 | |||||||
Other Assets in Excess of Liabilities — 0.3% | 3,490,640 | |||||||
NET ASSETS — 100.0% | $ | 1,303,101,549 |
The accompanying notes are an integral part of these financial statements.
23
Brown Advisory Small-Cap Fundamental Value Fund
Schedule of Investments
December 31, 2017 (Unaudited)
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Financials | 28.1 | % | ||
Consumer Discretionary | 16.7 | % | ||
Industrials | 16.1 | % | ||
Information Technology | 10.2 | % | ||
Real Estate Investment Trusts | 10.1 | % | ||
Energy | 5.7 | % | ||
Materials | 5.4 | % | ||
Money Market Funds | 2.7 | % | ||
Health Care | 1.9 | % | ||
Consumer Staples | 1.0 | % | ||
Telecommunication Services | 1.0 | % | ||
Utilities | 0.5 | % | ||
Real Estate | 0.3 | % | ||
Other Assets and Liabilities | 0.3 | % | ||
100.0 | % |
* | Non-Income Producing | |
† | All or a portion of this security is considered illiquid. At December 31, 2017 the total market value of securities considered illiquid was $59,259,967 or 4.5% of net assets. | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
24
Brown Advisory Global Leaders Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Global Leaders Fund (the “Fund”) increased 13.49% in value. During the same period, the Russell Global Large Cap Index, the Fund’s benchmark, returned 11.27%.
For the six months ended December 31, 2017, investors embraced positive corporate news and the mounting evidence of synchronized global growth to drive global equity indices to fresh highs. The Global Leaders 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 outstanding 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, stock price gains for our holdings in the information technology, financials and consumer staples sectors mirrored the strong operational performances those companies delivered. What is perhaps most noteworthy is that these three areas were detractors from performance in the fourth quarter of 2016 when investor euphoria about Donald Trump’s seemingly messianic economic powers prompted a sharp rotation away from these sectors. This episode serves as a reminder of the benefits of perspective as the market serves up opportunities for the long-sighted investor. On the negative front, consumer discretionary was the only significant area that detracted from performance with the impact being entirely stock-specific.
Core holding Microsoft was the largest single positive contributor to performance during the period. The company continues to effectively migrate its customers toward its cloud products whilst remaining relevant in its legacy technologies. Microsoft management put their customers at the center of their strategy – by breaking down traditional software silos they have enabled greater freedom for the millions of consumers and businesses that use their products. Estee Lauder’s fortunes in the period were paradigmatic of the importance of maintaining a long-term vision in the face of the market’s schizophrenic disposition and associated short-term share price volatility. Estee Lauder shares were propelled after it released strong results underpinned by healthy sales growth and profitability improvements. The luxury cosmetics specialist had a torrid time in 2016 as myopic investors fixated on the seemingly endless malaise of bricks and mortar retail and overlooked the company’s brand power and opportunities for self-help. Payments holdings MasterCard and Visa positively contributed to performance during the period with both companies reporting robust results underpinned by the ongoing global migration to a cashless world economy.
On the negative front there were no significant underperformers during the period; however, Priceline, Edwards Lifesciences and Nike were detractors as investors poorly received each company’s reported results.
We initiated a new position in Electronic Arts (“EA”) during the period. The company has the leading sports franchise in the industry and we believe they are set to benefit from the ongoing consolidation of gameplay to a smaller number of blockbuster titles. In addition, EA’s business model has continued to shift towards digital with downloading, and eventually streaming, improving the economics for shareholders over time. Finally, we believe that EA’s shares are undervalued and we see significant three-year upside as the digital transition plays out.
After extensive due diligence, we also added Deutsche Boerse to the Fund. The German company owns two valuable pieces of European financial infrastructure in derivative exchange Eurex and custody and settlement operation Clearstream. We believe the franchise is set to benefit from financial market regulation and any increase in volatility from today’s low levels. Deutsche Boerse shares remain attractively valued, on both an absolute and relative basis, as investors have priced in today’s market conditions as if they will persist forever – we view this as an opportunity for the far-sighted investor. Elsewhere we initiated a new position in another Germany company during the period – ticketing and live event specialist CTS Eventim. The company has had a dominant position in ticketing in Western Europe with a quasi-monopoly in Germany, Austria and Switzerland. CTS Eventim has multiple economic moats and significant optionality to monetize its extensive database of concert goers and sports fans.
In the period, we eliminated Moody’s from the Fund on valuation concerns following a long period of favorable conditions. We see Moody’s as a decent franchise with a strong market position, and one we will revisit in the future, but we felt that these characteristics were more than reflected in the share price given the current economic backdrop. We also eliminated both Nike and Verisk due to more attractive risk-reward opportunities elsewhere. Both franchises have attractive attributes, but we struggled to find meaningful upside and crucially adequate margin of safety relative to other opportunities in the portfolio.
25
Brown Advisory Global Leaders Fund
A Message to Our Shareholders
December 31, 2017
The Fund invests in what we view as market-leading companies from across the globe that 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 can compound excess economic profit at above-market growth rates for extended periods of time. Although the strategy produced healthy returns during 2017, we remain laser-focused on value within the portfolio as we strive to expose our clients to what we perceive to be the best blend of risk and reward. With this in mind, we take comfort from the Fund’s aggregate ROIC profile and the 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 continue creating value for clients in the future.
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.
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.
26
Brown Advisory Global Leaders Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 94.5% | ||||||||
China — 3.1% | ||||||||
192,283 | AIA Group, Ltd. | 1,635,492 | ||||||
France — 3.3% | ||||||||
16,594 | Safran SA | 1,711,593 | ||||||
Germany — 7.2% | ||||||||
23,441 | CTS Eventim AG & Co. KGaA | 1,089,808 | ||||||
9,223 | Deutsche Boerse AG | 1,067,518 | ||||||
13,496 | Henkel AG & Co. KGaA | 1,616,103 | ||||||
3,773,429 | ||||||||
India — 2.5% | ||||||||
44,150 | HDFC Bank, Ltd. | 1,307,570 | ||||||
Indonesia — 2.2% | ||||||||
4,192,300 | Bank Rakyat Indonesia Persero | 1,124,745 | ||||||
Japan — 1.8% | ||||||||
10,658 | Hoshizaki Corp. | 944,246 | ||||||
Sweden — 3.4% | ||||||||
46,465 | Atlas Copco AB | 1,780,868 | ||||||
Switzerland — 3.2% | ||||||||
7,259 | Schindler Holding AG | 1,641,474 | ||||||
Taiwan — 3.3% | ||||||||
43,024 | Taiwan Semiconductor | |||||||
Manufacturing Co., Ltd. ADR | 1,705,902 | |||||||
United Kingdom — 5.6% | ||||||||
64,524 | Hiscox, Ltd. | 1,275,391 | ||||||
30,431 | Unilever PLC | 1,687,886 | ||||||
2,963,277 | ||||||||
United States — 58.9% | ||||||||
Consumer Discretionary — 8.4% | ||||||||
6,026 | FleetCor Technologies, Inc.* | 1,159,583 | ||||||
671 | Priceline Group, Inc.* | 1,166,024 | ||||||
12,572 | Starbucks Corp. | 722,010 | ||||||
17,581 | TJX Companies, Inc. | 1,344,242 | ||||||
4,391,859 | ||||||||
Consumer Staples — 5.4% | ||||||||
12,179 | Brown-Forman Corp. | 836,332 | ||||||
15,274 | Estee Lauder Companies, Inc. | 1,943,464 | ||||||
2,779,796 | ||||||||
Financials — 6.9% | ||||||||
28,592 | Charles Schwab Corp. | 1,468,771 | ||||||
19,854 | JPMorgan Chase & Co. | 2,123,187 | ||||||
3,591,958 | ||||||||
Health Care — 5.8% | ||||||||
7,850 | Cigna Corp. | 1,594,256 | ||||||
12,877 | Edwards Lifesciences Corp.* | 1,451,367 | ||||||
3,045,623 | ||||||||
Industrials — 2.0% | ||||||||
4,356 | 3M Co. | 1,025,272 | ||||||
Information Technology — 25.4% | ||||||||
2,303 | Alphabet, Inc. — Class C* | 2,409,859 | ||||||
14,691 | Cognizant Technology Solutions Corp. | 1,043,355 | ||||||
6,957 | Electronic Arts, Inc.* | 730,902 | ||||||
8,554 | Facebook, Inc.* | 1,509,439 | ||||||
12,056 | MasterCard, Inc. | 1,824,796 | ||||||
30,353 | Microsoft Corp. | 2,596,396 | ||||||
14,233 | PayPal Holdings, Inc.* | 1,047,833 | ||||||
18,262 | Visa, Inc. | 2,082,233 | ||||||
13,244,813 | ||||||||
Materials — 5.0% | ||||||||
7,367 | Ecolab, Inc. | 988,504 | ||||||
3,924 | Sherwin-Williams Co. | 1,608,997 | ||||||
2,597,501 | ||||||||
Total United States | 30,676,822 | |||||||
Total Common Stocks (Cost $36,721,030) | 49,265,418 | |||||||
Short-Term Investments — 3.7% | ||||||||
Money Market Funds — 3.7% | ||||||||
1,908,681 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 1,908,681 | |||||||
Total Short-Term Investments (Cost $1,908,681) | 1,908,681 | |||||||
Total Investments — 98.2% (Cost $38,629,711) | 51,174,099 | |||||||
Other Assets in Excess of Liabilities — 1.8% | 930,508 | |||||||
NET ASSETS — 100.0% | $ | 52,104,607 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Information Technology | 28.7 | % | ||
Financials | 19.2 | % | ||
Consumer Discretionary | 12.3 | % | ||
Industrials | 11.8 | % | ||
Consumer Staples | 11.7 | % | ||
Health Care | 5.8 | % | ||
Materials | 5.0 | % | ||
Money Market Funds | 3.7 | % | ||
Other Assets and Liabilities | 1.8 | % | ||
100.0 | % |
ADR — American Depository Receipt | ||
* | Non-Income Producing | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
27
Brown Advisory Intermediate Income Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
For the six-month period ended December 31, 2017, the Brown Advisory Intermediate Income Fund Investor Shares (the “Fund”) returned 0.68%, which essentially matched the Fund’s benchmark, the Bloomberg Barclays Intermediate US Aggregate Bond Index (the “Index”), which rose 0.65%.
The Fund aims to generate performance primarily through individual security analysis, supported by a detailed and disciplined credit process.
Credit selection was again the primary contributor over this period. The corporate bonds within the Fund returned a positive 1.35% versus 1.21% for the Index. Our overweight to this sector (30% vs. 20% for the Index) was also a benefit to performance. Among our stronger performing individual selections were Education Realty, Energy Transfer Partners, Canadian Natural Resources, and Healthcare Trust of America, all with longer (7-10 years) maturities.
The continued strength in corporate bonds and subsequent tightening of yield spreads and the persistent flattening of the yield curve combined to benefit performance of good quality bonds in these longer maturities. This flattening has occurred as the Federal Reserve follows through on its intention to increase short-term rates to more normal levels and while inflation remains low; this has fostered robust demand for longer bonds offering relatively stable rates.
We used high-quality mortgage, asset-backed and taxable municipal holdings as a low-risk means to generate income. Our mortgage-backed process focuses on prepayment analysis to identify bonds that will repay principal more slowly and generate more interest over the life of the bond. We use short-duration, high-quality asset-backed issues, which have yields higher than comparable Treasuries, for their stable, self-liquidating nature. The portfolio holds taxable municipals as a credit diversifier to traditional corporate issues.
Looking forward, we cannot know definitively where interest rates may be headed; however, we believe that a disciplined and consistent process has the potential to lead to attractive income generation over time. Eventually, higher rates will benefit investors as, over time, reinvestment has the potential to increase the portfolio yield. In the meantime, we believe our bottom-up focus will continue to serve our clients well and we will continue to focus on the core stability that our investors expect from the Fund.
Sincerely,
Paul D. Corbin
Portfolio Manager
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. The Fund is subject to interest rate risk which is the risk that debt securities in the Fund’s portfolio will decline in value because of increases in market interest rates. Investments in Asset Backed and Mortgage Backed Securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities. Inflation-indexed bonds see the principal value of the security increased as the Consumer Price Index increases. Should the Consumer Price Index decline, those securities should be adversely impacted. Diversification does not assure a profit, nor does it protect against a loss in a declining market.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
28
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Corporate Bonds & Notes — 26.6% | |||||||||||||
665,000 | 21st Century Fox America, Inc. | 3.00 | % | 09/15/2022 | 675,457 | ||||||||
1,200,000 | Activision Blizzard, Inc.^ | 6.13 | % | 09/15/2023 | 1,272,377 | ||||||||
1,365,000 | American Express Credit Corp. (3 Month LIBOR USD + 0.70%) | 2.19 | % | 03/03/2022 | 1,373,246 | ||||||||
1,390,000 | American Tower Corp. | 2.25 | % | 01/15/2022 | 1,355,101 | ||||||||
1,355,000 | Analog Devices, Inc. | 3.13 | % | 12/05/2023 | 1,359,524 | ||||||||
1,365,000 | AstraZeneca PLC | 1.95 | % | 09/18/2019 | 1,357,868 | ||||||||
1,350,000 | AutoZone, Inc. | 2.50 | % | 04/15/2021 | 1,341,638 | ||||||||
1,330,000 | BB&T Corp. | 2.75 | % | 04/01/2022 | 1,340,240 | ||||||||
1,280,000 | Boston Properties L.P. | 3.85 | % | 02/01/2023 | 1,334,934 | ||||||||
1,400,000 | Broadcom Corp.^ | 3.88 | % | 01/15/2027 | 1,380,264 | ||||||||
1,262,000 | Campbell Soup Co. | 2.50 | % | 08/02/2022 | 1,249,506 | ||||||||
1,355,000 | Canadian Natural Resources, Ltd. | 3.80 | % | 04/15/2024 | 1,397,303 | ||||||||
1,306,000 | CC Holdings GS V LLC | 3.85 | % | 04/15/2023 | 1,348,990 | ||||||||
665,000 | Clorox Co. | 3.05 | % | 09/15/2022 | 679,868 | ||||||||
1,300,000 | Digital Realty Trust L.P. | 3.95 | % | 07/01/2022 | 1,359,413 | ||||||||
1,275,000 | Dollar General Corp. | 4.15 | % | 11/01/2025 | 1,351,848 | ||||||||
1,325,000 | Education Realty Operating Partnership L.P. | 4.60 | % | 12/01/2024 | 1,379,985 | ||||||||
1,025,000 | Enterprise Products Operating LLC (3 Month LIBOR USD +3.03%) | 5.25 | % | 08/16/2077 | 1,017,312 | ||||||||
1,205,000 | Fidelity National Information Services, Inc. | 5.00 | % | 10/15/2025 | 1,333,772 | ||||||||
675,000 | Healthcare Trust of America Holdings L.P. | 3.75 | % | 07/01/2027 | 673,594 | ||||||||
680,000 | JB Hunt Transport Services, Inc. | 2.40 | % | 03/15/2019 | 680,924 | ||||||||
1,210,000 | Land O’Lakes, Inc.^ | 6.00 | % | 11/15/2022 | 1,355,200 | ||||||||
1,290,000 | Martin Marietta Materials, Inc. | 4.25 | % | 07/02/2024 | 1,358,771 | ||||||||
1,295,000 | MPLX L.P. | 4.50 | % | 07/15/2023 | 1,369,802 | ||||||||
1,370,000 | Mylan NV | 3.95 | % | 06/15/2026 | 1,383,867 | ||||||||
1,005,000 | Noble Energy, Inc. | 3.85 | % | 01/15/2028 | 1,010,114 | ||||||||
675,000 | Rockwell Collins, Inc. | 2.80 | % | 03/15/2022 | 676,604 | ||||||||
1,350,000 | Royal Bank of Canada (3 Month LIBOR USD + 0.73%) | 2.11 | % | 02/01/2022 | 1,364,994 | ||||||||
1,405,000 | Verizon Communications, Inc. (3 Month LIBOR USD + 1.00%) | 2.60 | % | 03/16/2022 | 1,433,513 | ||||||||
775,000 | Xylem, Inc. | 3.25 | % | 11/01/2026 | 772,395 | ||||||||
Total Corporate Bonds & Notes (Cost $35,796,342) | 35,988,424 | ||||||||||||
Mortgage Backed Securities — 15.2% | |||||||||||||
2,308 | FHLMC PC, Pool# C0-0210 | 8.00 | % | 01/01/2023 | 2,479 | ||||||||
303,425 | FHLMC PC, Pool# 1B-0889 (12 Month LIBOR USD + 1.59%) | 3.40 | % | 05/01/2033 | 319,135 | ||||||||
1,777,031 | FHLMC PC, Pool# Q2-5749 | 4.00 | % | 04/01/2044 | 1,859,321 | ||||||||
1,241,342 | FHLMC PC, Pool# Q4-2019 | 3.00 | % | 07/01/2046 | 1,243,447 | ||||||||
60,365 | FHLMC REMIC, Series 2782 | 4.00 | % | 11/15/2033 | 60,702 | ||||||||
1,600,000 | FHMS, Series K-042 | 2.67 | % | 12/25/2024 | 1,604,580 | ||||||||
1,525,000 | FHMS, Series K-046 | 3.21 | % | 03/25/2025 | 1,577,502 | ||||||||
700,000 | FHMS, Series K-047# | 3.33 | % | 05/25/2025 | 729,534 | ||||||||
1,550,000 | FHMS, Series K-048# | 3.28 | % | 06/25/2025 | 1,609,883 | ||||||||
8,312 | FNMA, Pool# 625536 | 6.00 | % | 01/01/2032 | 9,294 | ||||||||
38,060 | FNMA, Pool# 628837 | 6.50 | % | 03/01/2032 | 42,220 | ||||||||
103,358 | FNMA, Pool# 663238 | 5.50 | % | 09/01/2032 | 113,275 | ||||||||
12,530 | FNMA, Pool# 741373 (1 Year CMT Rate + 2.28%) | 3.53 | % | 12/01/2033 | 12,982 | ||||||||
34,168 | FNMA, Pool# 744805 (6 Month LIBOR USD + 1.52%) | 3.02 | % | 11/01/2033 | 34,673 | ||||||||
63,649 | FNMA, Pool# 764342 (6 Month LIBOR USD + 1.52%) | 3.02 | % | 02/01/2034 | 65,760 | ||||||||
25,444 | FNMA, Pool# 848817 | 5.00 | % | 01/01/2036 | 27,382 | ||||||||
2,029,067 | FNMA, Pool# AB9339 | 3.00 | % | 05/01/2043 | 2,042,535 | ||||||||
537,912 | FNMA, Pool# AS1474 | 4.50 | % | 01/01/2044 | 575,182 | ||||||||
1,300,995 | FNMA, Pool# AS2826 | 4.00 | % | 07/01/2044 | 1,363,187 | ||||||||
676,663 | FNMA, Pool# AV7911 | 4.50 | % | 01/01/2044 | 721,496 | ||||||||
3,461,062 | FNMA, Pool# AY3879 | 3.50 | % | 11/01/2045 | 3,556,523 | ||||||||
1,688,698 | FNMA, Pool# AY3880 | 4.00 | % | 11/01/2045 | 1,767,364 | ||||||||
1,614,632 | FNMA REMIC Trust, Series 2013-115 A1~ | 3.00 | % | 04/25/2031 | 195,947 | ||||||||
15,721 | GNMA, Pool# 487110 | 6.50 | % | 04/15/2029 | 17,942 |
The accompanying notes are an integral part of these financial statements.
29
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Mortgage Backed Securities — 15.2% (Continued) | |||||||||||||
6,072 | GNMA, Pool# 571166 | 7.00 | % | 08/15/2031 | 6,212 | ||||||||
26,071 | GNMA, Pool# 781186 | 9.00 | % | 06/15/2030 | 28,525 | ||||||||
900,000 | MSC, Series 2017 — CLS A (1 Month LIBOR USD + 0.70%)^ | 1.95 | % | 11/15/2034 | 901,121 | ||||||||
Total Mortgage Backed Securities (Cost $20,492,082) | 20,488,203 | ||||||||||||
Municipal Bonds — 10.2% | |||||||||||||
670,000 | District of Columbia, Series 2010F | 4.71 | % | 12/01/2022 | 730,943 | ||||||||
1,600,000 | District of Columbia# | 3.92 | % | 08/01/2038 | 1,488,560 | ||||||||
1,395,000 | Florida Hurricane Catastrophe Fund | 2.11 | % | 07/01/2018 | 1,395,628 | ||||||||
600,000 | Georgetown University# | 2.46 | % | 04/01/2029 | 568,836 | ||||||||
1,000,000 | Illinois, State of | 2.30 | % | 06/15/2019 | 999,030 | ||||||||
1,390,000 | Maryland Health & Higher Educational Facilities Authority | 3.43 | % | 07/01/2023 | 1,413,964 | ||||||||
2,000,000 | Miami-Dade County Florida Aviation | 2.37 | % | 10/01/2023 | 1,941,220 | ||||||||
1,315,000 | New York State Dormitory Authority | 4.00 | % | 07/01/2039 | 1,359,920 | ||||||||
1,500,000 | New York State Energy Research & Development Authority# | 3.92 | % | 07/01/2029 | 1,500,000 | ||||||||
1,250,000 | North Texas Tollway Authority | 8.91 | % | 02/01/2030 | 1,403,612 | ||||||||
1,000,000 | Texas A&M University | 3.23 | % | 05/15/2027 | 1,016,120 | ||||||||
Total Municipal Bonds (Cost $13,859,091) | 13,817,833 | ||||||||||||
Asset Backed Securities — 8.6% | |||||||||||||
455,829 | AmeriCredit Automobile Receivables Trust, Series 2015-4 C | 1.70 | % | 07/08/2020 | 455,512 | ||||||||
875,000 | AmeriCredit Automobile Receivables Trust, Series 2015-3 B | 2.08 | % | 09/08/2020 | 875,512 | ||||||||
1,000,000 | BlueMountain CLO, Ltd., Series 2015-3A B (3 Month LIBOR USD +3.10%)^ | 4.46 | % | 10/20/2027 | 1,005,983 | ||||||||
1,896,912 | Capital Auto Receivables Asset Trust, Series B^ | 2.35 | % | 07/22/2019 | 1,897,770 | ||||||||
832,684 | Continental Airlines Trust, Series 1999-1 A | 6.55 | % | 08/02/2020 | 853,501 | ||||||||
794,390 | Federal Express Corp., Series 1998-1 | 6.72 | % | 07/15/2023 | 858,934 | ||||||||
1,500,000 | Octagon Investment Partners 24, Ltd., Series 2015-1A A2 (3 Month LIBOR USD + 1.35%)^ | 2.79 | % | 05/21/2027 | 1,500,390 | ||||||||
1,000,000 | Octagon Investment Partners 30, Ltd., Series 2017-1A B (3 Month LIBOR USD + 2.35%)^ | 3.71 | % | 03/17/2030 | 1,009,690 | ||||||||
73,233 | OSCAR U.S. Funding Trust IV, Series 2016-1A A2B (1 Month LIBOR USD + 1.70%)^ | 2.95 | % | 07/15/2020 | 73,621 | ||||||||
63,254 | OSCAR U.S. Funding Trust V, Series 2016-2A A2B (1 Month LIBOR USD + 1.40%)^ | 2.88 | % | 11/15/2019 | 63,488 | ||||||||
1,500,000 | OZLM XIII, Ltd., Series 2015-13A A2 (3 Month LIBOR USD + 2.10%)^ | 3.48 | % | 07/30/2027 | 1,512,726 | ||||||||
1,500,000 | Stewart Park CLO, Ltd., Series 2015-1A B (3 Month LIBOR USD + 2.00%)^ | 3.36 | % | 04/15/2026 | 1,500,219 | ||||||||
Total Asset Backed Securities (Cost $11,595,987) | 11,607,346 | ||||||||||||
U.S. Treasury Notes — 15.3% | |||||||||||||
1,360,000 | United States Treasury Note | 0.75 | % | 04/15/2018 | 1,357,693 | ||||||||
1,380,000 | United States Treasury Note | 0.75 | % | 07/31/2018 | 1,373,289 | ||||||||
5,495,000 | United States Treasury Note | 1.38 | % | 02/29/2020 | 5,433,718 | ||||||||
7,960,000 | United States Treasury Note | 1.88 | % | 08/31/2022 | 7,849,306 | ||||||||
5,000,000 | United States Treasury Note | 1.63 | % | 05/15/2026 | 4,710,254 | ||||||||
Total U.S. Treasury Notes (Cost $20,947,606) | 20,724,260 | ||||||||||||
Affiliated Mutual Funds (Note 3) — 21.8% | |||||||||||||
2,995,189 | Brown Advisory Mortgage Securities Fund — Institutional Shares | 29,502,612 | |||||||||||
Total Affiliated Mutual Funds (Cost $30,238,441) | 29,502,612 | ||||||||||||
Short-Term Investments — 2.6% | |||||||||||||
Money Market Funds — 2.6% | |||||||||||||
3,559,800 | First American Treasury Obligations Fund — Class Z 1.18%* | 3,559,800 | |||||||||||
Total Short-Term Investments (Cost $3,559,800) | 3,559,800 | ||||||||||||
Total Investments — 100.3% (Cost $136,489,349) | 135,688,478 | ||||||||||||
Liabilities in Excess of Other Assets — (0.3)% | (393,668 | ) | |||||||||||
NET ASSETS — 100.0% | $ | 135,294,810 |
The accompanying notes are an integral part of these financial statements.
30
Brown Advisory Intermediate Income Fund
Schedule of Investments
December 31, 2017 (Unaudited)
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Corporate Bonds & Notes | 26.6 | % | ||
Affiliated Mutual Funds | 21.8 | % | ||
U.S. Treasury Notes | 15.3 | % | ||
Mortgage Backed Securities | 15.2 | % | ||
Municipal Bonds | 10.2 | % | ||
Asset Backed Securities | 8.6 | % | ||
Money Market Funds | 2.6 | % | ||
Other Assets and Liabilities | (0.3 | )% | ||
100.0 | % |
# | Variable rate security. Rate disclosed is as of December 31, 2017. | |
* | Annualized seven-day yield as of December 31, 2017. | |
^ | 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, 2017, the value of these securities amounted to $13,472,849 or 10.0% of net assets. | |
~ | Interest Only Security |
The accompanying notes are an integral part of these financial statements.
31
Brown Advisory Total Return Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ending December 31, 2017, the Brown Advisory Total Return Fund Institutional Shares (the “Fund”) was up 1.81%, modestly ahead of the 1.24% return for its benchmark, the Bloomberg Barclays US Aggregate Bond Index.
The Fund aims to generate performance primarily through individual security analysis, supported by a detailed and disciplined credit process. Duration and sector weightings are set mainly by an analysis of the intermediate-term risk/reward, as opposed to any particular macroeconomic forecast.
Over this period, credit spreads generally moved tighter amid improving global growth confidence. This was mostly a benefit to the Fund’s performance, as both corporate bonds and securitized credit sectors performed well; the Fund was overweight to both sectors.
Among our stronger performing individual selections were Oasis Petroleum, Asbury Group, Tenneco, SESI and Meritor.
Yield curve positioning was also a mild positive for the period. While longer-term bonds yields were about unchanged during this period, short-term rates rose meaningfully as expectations increased for Federal Reserve rate hikes. We were mostly underweight 2- to 7-year bonds, which added roughly 12bps to relative performance.
The last six months has been a period of low volatility and favorable spread movements. This has been a period where a rising tide is lifting all boats. While we cannot hope to guess the timing, we know that, at some point, the business cycle will turn. A slowdown could also bring more rate volatility and wider credit spreads. We believe our disciplined and consistent process has the potential to really shine in times like that. Until then, we will continue to look for individual bond ideas that we believe can perform well in a steady state, while still attempting to protect our downside should things change.
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.
32
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Corporate Bonds & Notes — 34.0% | ||||||||||||
170,000 | Activision Blizzard, Inc.^ | 6.13 | % | 09/15/2023 | 180,253 | |||||||
950,000 | AerCap Ireland Capital DAC | 3.50 | % | 05/26/2022 | 965,077 | |||||||
515,000 | AK Steel Corp. | 7.50 | % | 07/15/2023 | 560,062 | |||||||
545,000 | Allison Transmission, Inc.^ | 4.75 | % | 10/01/2027 | 549,769 | |||||||
1,140,000 | American Tower Corp. | 3.13 | % | 01/15/2027 | 1,099,666 | |||||||
1,045,000 | Analog Devices, Inc. | 3.90 | % | 12/15/2025 | 1,094,247 | |||||||
530,000 | Asbury Automotive Group, Inc. | 6.00 | % | 12/15/2024 | 554,486 | |||||||
1,120,000 | AutoZone, Inc. | 3.13 | % | 04/21/2026 | 1,092,859 | |||||||
515,000 | Ball Corp. | 5.00 | % | 03/15/2022 | 551,694 | |||||||
560,000 | Boston Properties L.P. | 3.65 | % | 02/01/2026 | 569,861 | |||||||
1,000,000 | Broadcom Corp.^ | 3.88 | % | 01/15/2027 | 985,903 | |||||||
1,014,000 | Campbell Soup Co. | 2.50 | % | 08/02/2022 | 1,003,961 | |||||||
1,070,000 | Canadian Natural Resources, Ltd. | 3.80 | % | 04/15/2024 | 1,103,405 | |||||||
1,050,000 | Capital One Financial Corp. (3 Month LIBOR USD + 3.80%) | 5.55 | % | 12/29/2049 | 1,089,375 | |||||||
1,030,000 | CC Holdings GS V LLC | 3.85 | % | 04/15/2023 | 1,063,905 | |||||||
1,125,000 | Clorox Co. | 3.10 | % | 10/01/2027 | 1,119,739 | |||||||
555,000 | Delphi Technologies PLC^ | 5.00 | % | 10/01/2025 | 563,325 | |||||||
1,025,000 | Dollar General Corp. | 4.15 | % | 11/01/2025 | 1,086,780 | |||||||
540,000 | Education Realty Operating Partnership L.P. | 4.60 | % | 12/01/2024 | 562,409 | |||||||
1,090,000 | Energy Transfer Partners L.P. (3 Month LIBOR USD + 4.03%) | 6.25 | % | 05/15/2023 | 1,060,706 | |||||||
955,000 | Enterprise Products Operating LLC (3 Month LIBOR USD + 3.03%) | 5.25 | % | 08/16/2077 | 947,838 | |||||||
1,065,000 | Equinix, Inc. | 5.88 | % | 01/15/2026 | 1,146,206 | |||||||
65,000 | Equinix, Inc. | 5.38 | % | 05/15/2027 | 69,713 | |||||||
960,000 | Fidelity National Information Services, Inc. | 5.00 | % | 10/15/2025 | 1,062,590 | |||||||
500,000 | First Quality Finance Co., Inc.^ | 5.00 | % | 07/01/2025 | 511,250 | |||||||
825,000 | Healthcare Trust of America Holdings L.P. | 3.75 | % | 07/01/2027 | 823,281 | |||||||
1,065,000 | Hudbay Minerals, Inc.^ | 7.25 | % | 01/15/2023 | 1,134,225 | |||||||
1,095,000 | JB Hunt Transport Services, Inc. | 2.40 | % | 03/15/2019 | 1,096,487 | |||||||
1,035,000 | Keysight Technologies, Inc. | 4.55 | % | 10/30/2024 | 1,099,603 | |||||||
505,000 | Lamar Media Corp. | 5.75 | % | 02/01/2026 | 540,981 | |||||||
1,120,000 | Lear Corp. | 3.80 | % | 09/15/2027 | 1,123,222 | |||||||
1,045,000 | Martin Marietta Materials, Inc. | 4.25 | % | 07/02/2024 | 1,100,710 | |||||||
530,000 | Mercer International, Inc. | 6.50 | % | 02/01/2024 | 564,450 | |||||||
535,000 | Meritor, Inc. | 6.25 | % | 02/15/2024 | 565,763 | |||||||
1,010,000 | MPLX L.P. | 4.88 | % | 12/01/2024 | 1,090,233 | |||||||
1,075,000 | Mylan NV | 3.95 | % | 06/15/2026 | 1,085,881 | |||||||
1,100,000 | Noble Energy, Inc. | 3.85 | % | 01/15/2028 | 1,105,597 | |||||||
560,000 | Oasis Petroleum, Inc. | 6.50 | % | 11/01/2021 | 573,300 | |||||||
338,000 | ServiceMaster Co. LLC | 7.45 | % | 08/15/2027 | 367,575 | |||||||
540,000 | SESI LLC | 7.13 | % | 12/15/2021 | 554,175 | |||||||
1,095,000 | Springs Industries, Inc. | 6.25 | % | 06/01/2021 | 1,119,638 | |||||||
595,000 | Staples, Inc.^ | 8.50 | % | 09/15/2025 | 551,862 | |||||||
1,000,000 | TechnipFMC PLC^ | 3.45 | % | 10/01/2022 | 999,369 | |||||||
450,000 | Teck Resources, Ltd.^ | 8.50 | % | 06/01/2024 | 509,625 | |||||||
598,000 | Tenneco, Inc. | 5.00 | % | 07/15/2026 | 614,445 | |||||||
1,200,000 | Verisk Analytics, Inc. | 4.00 | % | 06/15/2025 | 1,242,845 | |||||||
560,000 | Viking Cruises, Ltd.^ | 5.88 | % | 09/15/2027 | 571,200 | |||||||
636,000 | Xylem, Inc. | 3.25 | % | 11/01/2026 | 633,863 | |||||||
Total Corporate Bonds & Notes (Cost $39,441,293) | 39,663,409 | |||||||||||
Mortgage Backed Securities — 30.1% | ||||||||||||
400,000 | BAMLL Commercial Mortgage Securities Trust, Series 2013-DSNY A | |||||||||||
(1 Month LIBOR USD + 1.05%)^ | 2.53 | % | 09/15/2026 | 400,971 | ||||||||
400,000 | BAMLL Commercial Mortgage Securities Trust, Series 2017-BNK3 AS | 3.75 | % | 02/17/2050 | 411,832 | |||||||
600,000 | BANK, Series 2017-BNK4 AS (1 Month LIBOR USD + 2.85%) | 3.78 | % | 05/17/2050 | 614,950 | |||||||
105,128 | Bayview Opportunity Master Fund IIIb Trust, Series 2017-CRT2 M | |||||||||||
(1 Month LIBOR USD + 2.00%)^ | 3.56 | % | 11/29/2027 | 105,390 |
The accompanying notes are an integral part of these financial statements.
33
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 30.1% (Continued) | ||||||||||||
180,978 | Bayview Opportunity Master Fund IVb Trust, Series 2017-CRT1 M | |||||||||||
(1 Month LIBOR USD + 2.15%)^ | 3.71 | % | 10/25/2028 | 181,704 | ||||||||
250,000 | Chicago Skyscraper Trust, Series 2017-SKY B (1 Month LIBOR USD + 1.10%)^ | 2.58 | % | 02/15/2030 | 250,562 | |||||||
250,000 | Chicago Skyscraper Trust, Series 2017-SKY C (1 Month LIBOR USD + 1.25%)^ | 2.73 | % | 02/15/2030 | 250,877 | |||||||
4,000,000 | FHLMC Gold, 3.5%, Due TBA January | 3.50 | % | 01/15/2047 | 4,108,022 | |||||||
467,410 | FHLMC PC, Pool# J3-2596 | 3.50 | % | 08/01/2030 | 483,416 | |||||||
358,195 | FHLMC PC, Pool# Q4-6676 | 4.50 | % | 03/01/2047 | 380,948 | |||||||
346,631 | FHLMC PC, Pool# Q4-7871 | 4.00 | % | 05/01/2047 | 362,742 | |||||||
299,588 | FHLMC PC, Pool# Q5-2011 | 4.00 | % | 11/01/2047 | 313,515 | |||||||
2,776,065 | FHLMC REMIC, Series 4094~ | 2.50 | % | 03/15/2027 | 185,797 | |||||||
804,124 | FHLMC REMIC, Series 4107~ | 3.00 | % | 08/15/2027 | 168,442 | |||||||
1,917,983 | FHLMC REMIC, Series 4143~ | 3.50 | % | 09/15/2042 | 226,658 | |||||||
963,166 | FHLMC REMIC, Series 4495~ | 3.50 | % | 07/15/2045 | 176,644 | |||||||
275,000 | FHLMC SCRTT, Series 2016-1 M1#^ | 3.00 | % | 09/25/2055 | 267,510 | |||||||
559,932 | FHLMC STACR Debt Notes, Series 2015-DNA3 M2 (1 Month LIBOR USD + 2.85%) | 4.40 | % | 04/25/2028 | 579,629 | |||||||
547,769 | FHLMC STACR Debt Notes, Series 2016-DNA2 M2 (1 Month LIBOR USD + 2.20%) | 3.75 | % | 10/25/2028 | 555,437 | |||||||
549,361 | FHMS, Series K-J13 | 2.06 | % | 09/25/2021 | 547,724 | |||||||
400,000 | FHMS, Series K-J18 | 2.46 | % | 03/25/2022 | 400,086 | |||||||
295,672 | FHMS, Series K-J09 | 2.02 | % | 04/25/2022 | 293,451 | |||||||
2,029,372 | FHMS, Series K-721#~ | 0.34 | % | 08/25/2022 | 26,558 | |||||||
470,604 | FHMS, Series K-J07 | 1.53 | % | 09/25/2022 | 458,221 | |||||||
1,700,000 | FHMS, Series K-728# | 3.06 | % | 08/25/2024 | 1,744,098 | |||||||
748,267 | FHMS, Series K-J17 | 2.40 | % | 10/25/2024 | 745,273 | |||||||
3,473,931 | FHMS, Series K-046#~ | 0.38 | % | 03/25/2025 | 82,430 | |||||||
1,567,334 | FHMS, Series K-055#~ | 1.37 | % | 03/25/2026 | 144,730 | |||||||
821,663 | FHMS, Series K-056#~ | 1.27 | % | 05/25/2026 | 70,857 | |||||||
698,527 | FHMS, Series K-057#~ | 1.19 | % | 07/25/2026 | 58,232 | |||||||
679,888 | FHMS, Series K-058#~ | 0.93 | % | 08/25/2026 | 45,778 | |||||||
1,398,290 | FHMS, Series K-W03 X1#~ | 0.85 | % | 06/25/2027 | 83,950 | |||||||
1,049,944 | FHMS, Series Q-004# | 2.66 | % | 01/25/2046 | 1,059,760 | |||||||
1,708,806 | FNMA, Pool# AS2249 | 4.00 | % | 04/01/2039 | 1,796,311 | |||||||
900,147 | FNMA, Pool# AB9349 | 3.00 | % | 05/01/2043 | 905,148 | |||||||
585,513 | FNMA, Pool# AU6230 | 5.00 | % | 09/01/2043 | 631,571 | |||||||
821,632 | FNMA, Pool# AY0677 | 3.50 | % | 03/01/2045 | 848,956 | |||||||
538,878 | FNMA, Pool# AZ8218 | 4.00 | % | 08/01/2045 | 564,319 | |||||||
989,338 | FNMA, Pool# BD3994 | 4.00 | % | 04/01/2047 | 1,035,884 | |||||||
1,095,437 | FNMA, Pool# BD4016 | 4.00 | % | 07/01/2047 | 1,167,543 | |||||||
399,073 | FNMA, Pool# BJ1740 | 4.50 | % | 10/01/2047 | 426,758 | |||||||
399,458 | FNMA, Pool# BJ1991 | 4.00 | % | 11/01/2047 | 418,870 | |||||||
399,520 | FNMA, Pool# BD4041 | 4.00 | % | 11/01/2047 | 422,893 | |||||||
400,000 | FNMA, Pool# BH7686 | 4.50 | % | 12/01/2047 | 427,749 | |||||||
99,979 | FNMA REMIC Trust, Series 2017-T1 | 2.90 | % | 06/25/2027 | 99,568 | |||||||
923,000 | FNMA REMIC Trust, Series 2017-M13 A2# | 2.94 | % | 09/25/2027 | 931,074 | |||||||
1,000,000 | FNMA, 2.5%, Due TBA January | 2.50 | % | 01/15/2030 | 998,516 | |||||||
1,000,000 | FNMA, 3.0%, Due TBA January | 3.00 | % | 01/15/2030 | 1,018,633 | |||||||
3,000,000 | FNMA, 3.0%, Due TBA January | 3.00 | % | 01/15/2047 | 3,000,234 | |||||||
650,000 | FREMF Mortgage Trust, Series 2017-K729#^ | 3.67 | % | 11/25/2024 | 646,403 | |||||||
1,500,000 | GNMA II, 3.0%, Due TBA January | 3.00 | % | 01/15/2047 | 1,513,711 | |||||||
1,156,519 | GNMA REMIC Trust, Series 2014-45 B1#~ | 0.77 | % | 07/16/2054 | 54,246 | |||||||
1,011,546 | GNMA REMIC Trust, Series 2014-135 I0#~ | 0.83 | % | 01/16/2056 | 50,364 | |||||||
1,009,498 | GNMA REMIC Trust, Series 2015-172 I0#~ | 0.92 | % | 03/16/2057 | 61,537 | |||||||
1,329,547 | GNMA REMIC Trust, Series 2016-40 I0#~ | 0.78 | % | 07/16/2057 | 77,249 | |||||||
1,083,702 | GNMA REMIC Trust, Series 2016-56 I0#~ | 0.99 | % | 11/16/2057 | 77,845 | |||||||
605,483 | GNMA REMIC Trust, Series 2016-127 I0#~ | 0.95 | % | 05/16/2058 | 44,959 | |||||||
1,292,664 | GNMA REMIC Trust, Series 2016-98 I0#~ | 0.96 | % | 05/16/2058 | 92,044 | |||||||
1,183,526 | GNMA REMIC Trust, Series 2016-110 I0#~ | 1.04 | % | 05/16/2058 | 96,313 |
The accompanying notes are an integral part of these financial statements.
34
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 30.1% (Continued) | ||||||||||||
300,000 | GSMS, Series 2017-GS6 AS | 3.64 | % | 05/12/2050 | 305,774 | |||||||
200,000 | JPMCC, Series 2016-ASH A (1 Month LIBOR USD + 1.50%)^ | 2.98 | % | 10/16/2034 | 200,568 | |||||||
185,000 | MAD Mortgage Trust, Series 2017-330M B#^ | 3.37 | % | 08/17/2034 | 186,294 | |||||||
200,000 | MSC, Series 2017-PRME B (1 Month LIBOR USD + 1.35%)^ | 2.83 | % | 02/15/2034 | 200,538 | |||||||
275,000 | MSC, Series 2017-CLS C (1 Month LIBOR USD + 1.00%)^ | 2.25 | % | 11/15/2034 | 275,212 | |||||||
175,000 | MSC, Series 2017-CLS D (1 Month LIBOR USD + 1.40%)^ | 2.65 | % | 11/15/2034 | 175,250 | |||||||
555,000 | WFCM, Series 2017-RB1 AS | 3.76 | % | 03/17/2050 | 575,451 | |||||||
Total Mortgage Backed Securities (Cost $35,244,224) | 35,113,979 | |||||||||||
Asset Backed Securities — 25.1% | ||||||||||||
217,950 | Aircraft Certificate Owner Trust, Series 2003-1A E^ | 7.00 | % | 09/20/2022 | 231,026 | |||||||
125,000 | American Airlines Trust, Series 2017-2 AA | 3.35 | % | 04/15/2031 | 126,491 | |||||||
200,000 | American Credit Acceptance Receivables Trust, Series 2017-3 B^ | 2.25 | % | 01/11/2021 | 199,334 | |||||||
300,000 | American Credit Acceptance Receivables Trust, Series 2017-2 B^ | 2.46 | % | 04/12/2021 | 299,750 | |||||||
150,000 | American Credit Acceptance Receivables Trust, Series 2015-1 C^ | 4.29 | % | 04/12/2021 | 151,499 | |||||||
350,000 | American Credit Acceptance Receivables Trust, Series 2017-3 C^ | 2.72 | % | 06/10/2022 | 348,442 | |||||||
650,000 | American Credit Acceptance Receivables Trust, Series 2017-4 C^ | 2.94 | % | 01/10/2024 | 650,257 | |||||||
139,685 | Bayview Opportunity Master Fund IIIa Trust, Series 2017-RN7 A1ʭ^ | 3.10 | % | 09/28/2032 | 139,754 | |||||||
73,250 | Bayview Opportunity Master Fund IVb Trust, Series 2017-NPL1 A1ʭ^ | 3.60 | % | 01/28/2032 | 73,521 | |||||||
222,454 | Bayview Opportunity Master Fund IVb Trust, Series 2017-SPL4 A#^ | 3.50 | % | 01/28/2055 | 226,184 | |||||||
500,000 | BlueMountain CLO, Ltd., Series 2013-3A DR (3 Month LIBOR USD + 2.90%)^ | 4.28 | % | 10/29/2025 | 501,160 | |||||||
650,000 | BlueMountain CLO, Ltd., Series 2015-2 (3 Month LIBOR USD + 1.85%)^ | 3.20 | % | 07/18/2027 | 653,585 | |||||||
146,450 | BRE Grand Islander Timeshare Issuer LLC, Series 2017-1A A^ | 2.94 | % | 05/25/2029 | 145,602 | |||||||
556,221 | Continental Airlines Trust, Series 1999-1 A | 6.55 | % | 08/02/2020 | 570,126 | |||||||
86,072 | Continental Airlines Trust, Series 2000-1 A-1 | 8.05 | % | 05/01/2022 | 95,002 | |||||||
175,000 | CPS Auto Receivables Trust, Series 2017-B B^ | 2.33 | % | 05/17/2021 | 174,491 | |||||||
200,000 | CPS Auto Receivables Trust, Series 2017-A B^ | 2.68 | % | 05/17/2021 | 200,308 | |||||||
500,000 | Dell Equipment Finance Trust, Series 2015-2 B^ | 2.21 | % | 09/22/2020 | 500,099 | |||||||
150,000 | Drive Auto Receivables Trust, Series 2017-BA B^ | 2.20 | % | 05/15/2020 | 150,281 | |||||||
450,000 | Drive Auto Receivables Trust, Series 2017-AA B^ | 2.51 | % | 01/15/2021 | 451,311 | |||||||
400,000 | Drive Auto Receivables Trust, Series 2017-2 B | 2.25 | % | 06/15/2021 | 400,254 | |||||||
350,000 | Drive Auto Receivables Trust, Series 2017-AA C^ | 2.98 | % | 01/18/2022 | 352,467 | |||||||
200,000 | Drive Auto Receivables Trust, Series 2017-2 C | 2.75 | % | 09/15/2023 | 200,366 | |||||||
2,334 | DT Auto Owner Trust, Series 2016-1A B^ | 2.79 | % | 05/15/2020 | 2,334 | |||||||
175,000 | DT Auto Owner Trust, Series 2017-3A C^ | 3.01 | % | 05/15/2023 | 175,356 | |||||||
800,000 | DT Auto Owner Trust, Series 2017-4^ | 2.86 | % | 07/17/2023 | 800,506 | |||||||
714,951 | Federal Express Corp., Series 1998-1 | 6.72 | % | 07/15/2023 | 773,041 | |||||||
500,000 | Grippen Park CLO, Ltd., Series 2017-1A C (3 Month LIBOR USD + 2.30%)^ | 3.66 | % | 01/20/2030 | 503,837 | |||||||
1,500,000 | Highbridge Loan Management, Ltd., Series 4A-2014 A2A (3 Month LIBOR USD + 2.05%)^ | 3.43 | % | 07/28/2025 | 1,501,075 | |||||||
1,500,000 | Highbridge Loan Management, Ltd., Series 4A-2014 B (3 Month LIBOR USD + 3.00%)^ | 4.38 | % | 07/28/2025 | 1,501,709 | |||||||
800,000 | Highbridge Loan Management, Ltd., Series 7a-2015 C (3 Month LIBOR USD + 3.38%)^ | 4.80 | % | 11/15/2026 | 801,764 | |||||||
1,000,000 | Highbridge Loan Management, Ltd., Series 6A-2015 C (3 Month LIBOR USD + 3.07%)^ | 4.46 | % | 05/05/2027 | 1,001,472 | |||||||
49,031 | Hilton Grand Vacations Trust, Series 2013-A A^ | 2.28 | % | 01/25/2026 | 48,701 | |||||||
125,624 | Hilton Grand Vacations Trust, Series 2017-AA A^ | 2.66 | % | 12/26/2028 | 124,820 | |||||||
300,000 | Invitation Homes Trust, Series 2017-SFR2 B (1 Month LIBOR USD + 1.15%)^ | 2.64 | % | 12/19/2036 | 301,191 | |||||||
200,000 | Invitation Homes Trust, Series 2017-SFR2 C (1 Month LIBOR USD + 1.45%)^ | 2.94 | % | 12/19/2036 | 201,665 | |||||||
1,000,000 | Madison Park Funding XIII, Ltd., Series 2014-13R D-R (3 Month LIBOR USD + 3.27%)^ | 4.63 | % | 01/21/2025 | 1,008,324 | |||||||
750,000 | Madison Park Funding XVII, Ltd., Series 2015-17A B1R (3 Month LIBOR USD + 1.75%)^ | 3.11 | % | 07/21/2030 | 757,318 | |||||||
625,000 | Madison Park Funding XVII, Ltd., Series 2015-17A CR (3 Month LIBOR USD + 2.40%)^ | 3.76 | % | 07/22/2030 | 633,837 | |||||||
59,989 | MVW Owner Trust, Series 2013-1A A^ | 2.15 | % | 04/22/2030 | 59,241 | |||||||
150,080 | MVW Owner Trust, Series 2015-1A A^ | 2.52 | % | 12/20/2032 | 149,415 | |||||||
68,537 | MVW Owner Trust, Series 2016-1A A^ | 2.25 | % | 12/20/2033 | 67,814 | |||||||
96,129 | MVW Owner Trust, Series 2017-1A A^ | 2.42 | % | 12/20/2034 | 95,337 | |||||||
96,129 | MVW Owner Trust, Series 2017-1A B^ | 2.75 | % | 12/20/2034 | 95,137 | |||||||
200,000 | Nationstar HECM Loan Trust, Series 2017-2A M1#^ | 2.82 | % | 09/25/2027 | 200,594 | |||||||
1,000,000 | Octagon Investment Partners 30, Ltd., Series 2017-1A B (3 Month LIBOR USD + 2.35%)^ | 3.71 | % | 03/17/2030 | 1,009,690 | |||||||
1,000,000 | Octagon Investment Partners XXII, Ltd., Series 2014-1A B2R (3 Month LIBOR USD + 1.60%)^ | 2.96 | % | 11/25/2025 | 1,004,200 |
The accompanying notes are an integral part of these financial statements.
35
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Asset Backed Securities — 25.1% (Continued) | ||||||||||||
138,198 | Orange Lake Timeshare Trust, Series 2016-A A^ | 2.61 | % | 03/08/2029 | 137,240 | |||||||
146,465 | OSCAR U.S. Funding Trust IV, Series 2016-1A A2B (1 Month LIBOR USD + 1.70%)^ | 2.95 | % | 07/15/2020 | 147,241 | |||||||
25,302 | OSCAR U.S. Funding Trust V, Series 2016-2A A2B (1 Month LIBOR USD + 1.40%)^ | 2.88 | % | 11/15/2019 | 25,395 | |||||||
134,213 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2B (1 Month LIBOR USD + 0.80%)^ | 2.23 | % | 05/11/2020 | 134,434 | |||||||
434,220 | OSCAR U.S. Funding Trust VI LLC, Series 2017-6^ | 2.30 | % | 05/11/2020 | 434,278 | |||||||
200,000 | OSCAR U.S. Funding Trust VII LLC, Series 2017-2A A2B (1 Month LIBOR USD + 0.65%)^ | 2.08 | % | 11/10/2020 | 200,295 | |||||||
1,000,000 | OZLM XIII, Ltd., Series 2015-13A A2 (3 Month LIBOR USD + 2.10%)^ | 3.48 | % | 07/30/2027 | 1,008,484 | |||||||
192,203 | Prestige Auto Receivables Trust, Series 2014-1A B^ | 1.91 | % | 04/15/2020 | 192,215 | |||||||
750,000 | Regatta III Funding, Ltd., Series 2014-1A CR (3 Month LIBOR USD + 3.30%)^ | 4.66 | % | 04/15/2026 | 750,274 | |||||||
530,000 | Santander Drive Auto Receivables Trust, Series 2016-1 B | 2.47 | % | 12/15/2020 | 530,978 | |||||||
400,000 | Santander Drive Auto Receivables Trust, Series 2017-2 C | 2.79 | % | 08/15/2022 | 401,481 | |||||||
41,761 | Sierra Timeshare Receivables Funding LLC, Series 2014-1A A^ | 2.07 | % | 03/20/2030 | 41,669 | |||||||
54,206 | Sierra Timeshare Receivables Funding LLC, Series 2014-3A A^ | 2.30 | % | 10/20/2031 | 54,034 | |||||||
53,524 | Sierra Timeshare Receivables Funding LLC, Series 2015-2A A^ | 2.43 | % | 06/20/2032 | 53,275 | |||||||
53,592 | Sierra Timeshare Receivables Funding LLC, Series 2015-3A A^ | 2.58 | % | 09/20/2032 | 53,580 | |||||||
101,681 | Sierra Timeshare Receivables Funding LLC, Series 2016-2A A^ | 2.33 | % | 07/20/2033 | 100,950 | |||||||
72,792 | Sierra Timeshare Receivables Funding LLC, Series 2016-3A A^ | 2.43 | % | 10/20/2033 | 72,433 | |||||||
90,817 | Sierra Timeshare Receivables Funding LLC, Series 2017-1A A^ | 2.91 | % | 03/20/2034 | 91,038 | |||||||
190,947 | Southwest Airlines Co., Series 2007-1 | 6.15 | % | 02/01/2024 | 207,951 | |||||||
1,000,000 | Stewart Park CLO, Ltd., Series 2015-1A B (3 Month LIBOR USD + 2.00%)^ | 3.36 | % | 04/15/2026 | 1,000,146 | |||||||
1,000,000 | Stewart Park CLO, Ltd., Series 2015-1A C (3 Month LIBOR USD + 2.90%)^ | 4.26 | % | 04/15/2026 | 1,000,148 | |||||||
25,426 | U.S. Airways Pass Through Trust, Series 1999-1 A | 8.36 | % | 07/20/2020 | 25,934 | |||||||
375,000 | Verizon Owner Trust, Series 2016-1A A^ | 1.42 | % | 01/20/2021 | 373,006 | |||||||
45,659 | �� | VOLT LIV LLC, Series 2017-NPL1 A1ʭ^ | 3.50 | % | 02/25/2047 | 45,839 | ||||||
150,932 | VOLT LIX LLC, Series 2017-NPL6 A1ʭ^ | 3.25 | % | 05/28/2047 | 151,686 | |||||||
111,612 | VOLT LV LLC, Series 2017-NPL2 A1ʭ^ | 3.50 | % | 03/25/2047 | 112,299 | |||||||
195,186 | VOLT LVI LLC, Series 2017-NPL3 A1ʭ^ | 3.50 | % | 03/25/2047 | 196,510 | |||||||
96,595 | VOLT LVII LLC, Series 2017-NPL4 A1ʭ^ | 3.38 | % | 04/25/2047 | 97,218 | |||||||
127,926 | VOLT LVIII LLC, Series 2017-NPL5 A1ʭ^ | 3.38 | % | 05/28/2047 | 128,436 | |||||||
87,767 | VOLT LXI LLC, Series 2017-NPL8 A1ʭ^ | 3.13 | % | 06/25/2047 | 88,023 | |||||||
168,215 | VOLT LXII LLC, Series 2017-NPL9 A1ʭ^ | 3.13 | % | 09/25/2047 | 168,532 | |||||||
200,000 | VOLT LXIII LLC, Series 2017-NPL10ʭ^ | 3.00 | % | 10/25/2047 | 199,926 | |||||||
84,209 | VOLT XXXVIII LLC, Series 2015-NP12 A1ʭ^ | 3.88 | % | 09/25/2045 | 84,555 | |||||||
74,786 | VSE VOI Mortgage LLC, Series 2016-A A^ | 2.54 | % | 07/20/2033 | 74,155 | |||||||
12,043 | Westlake Automobile Receivables Trust, Series 2015-1A C^ | 2.29 | % | 11/16/2020 | 12,044 | |||||||
175,000 | Westlake Automobile Receivables Trust, Series 2016-1A C^ | 3.29 | % | 09/15/2021 | 175,740 | |||||||
175,000 | Westlake Automobile Receivables Trust, Series 2016-3A B^ | 2.07 | % | 12/15/2021 | 174,483 | |||||||
175,000 | Westlake Automobile Receivables Trust, Series 2016-3A C^ | 2.46 | % | 01/18/2022 | 174,142 | |||||||
305,000 | Westlake Automobile Receivables Trust, Series 2017-1A C^ | 2.70 | % | 10/17/2022 | 305,122 | |||||||
375,000 | Westlake Automobile Receivables Trust, Series 2017-2A C^ | 2.59 | % | 12/15/2022 | 372,510 | |||||||
Total Asset Backed Securities (Cost $29,189,344) | 29,257,387 | |||||||||||
U.S. Treasury Notes — 6.6% | ||||||||||||
7,725,000 | United States Treasury Note | 0.75 | % | 04/15/2018 | 7,711,897 | |||||||
Total U.S. Treasury Notes (Cost $7,711,988) | 7,711,897 | |||||||||||
Municipal Bonds — 5.7% | ||||||||||||
230,000 | American Municipal Power, Inc. | 6.05 | % | 02/15/2043 | 310,820 | |||||||
2,000,000 | District of Columbia# | 3.92 | % | 08/01/2038 | 1,860,700 | |||||||
450,000 | Georgetown University# | 2.46 | % | 04/01/2029 | 426,627 | |||||||
1,200,000 | Health Care Authority for Baptist Health | 5.50 | % | 11/15/2043 | 1,383,720 | |||||||
750,000 | Massachusetts Port Authority# | 2.54 | % | 01/01/2031 | 710,797 | |||||||
1,000,000 | New York State Energy Research & Development Authority# | 3.92 | % | 07/01/2029 | 1,000,000 | |||||||
800,000 | North Texas Tollway Authority | 8.91 | % | 02/01/2030 | 898,312 | |||||||
Total Municipal Bonds (Cost $6,443,350) | 6,590,976 |
The accompanying notes are an integral part of these financial statements.
36
Brown Advisory Total Return Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par | ||||||||
Value/Shares | Security Description | Value $ | ||||||
Short-Term Investments — 5.4% | ||||||||
Money Market Funds — 4.9% | ||||||||
5,660,047 | First American Treasury Obligations Fund — Class Z, 1.18%* | 5,660,047 | ||||||
U.S. Treasury Bills — 0.5% | ||||||||
550,000 | United States Treasury Bill† | 547,627 | ||||||
Total Short-Term Investments (Cost $6,208,044) | 6,207,674 | |||||||
Total Investments — 106.9% (Cost $124,238,243) | 124,545,322 | |||||||
Liabilities in Excess of Other Assets — (6.9)% | (8,067,206 | ) | ||||||
NET ASSETS — 100.0% | $ | 116,478,116 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Corporate Bonds & Notes | 34.0 | % | ||
Mortgage Backed Securities | 30.1 | % | ||
Asset Backed Securities | 25.1 | % | ||
U.S. Treasury Notes | 6.6 | % | ||
Municipal Bonds | 5.7 | % | ||
Money Market Funds | 4.9 | % | ||
U.S. Treasury Bills | 0.5 | % | ||
Other Assets and Liabilities | (6.9 | )% | ||
100.0 | % |
# | Variable rate security. Rate disclosed is as of December 31, 2017. | |
ʭ | Step bond; the interest rate shown is the rate in effect as of December 31, 2017. | |
^ | 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, 2017, the value of these securities amounted to $35,623,823 or 30.6% of net assets. | |
~ | Interest Only Security | |
† | This security is pledged as collateral in connection with open futures contracts. | |
* | Annualized seven-day yield as of December 31, 2017. |
Futures Contracts — Long (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury Long Bond Futures March 2018 | 18 | 03/20/2018 | $ | 2,753,665 | $ | 2,754,000 | $ | 335 | |||||||||
U.S. Treasury Ultra Bond Futures March 2018 | 80 | 03/20/2018 | 13,349,139 | 13,412,500 | 63,361 | ||||||||||||
$ | 16,102,804 | $ | 16,166,500 | $ | 63,696 | ||||||||||||
Futures Contracts — Short (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury 10-Year Note Futures March 2018 | (50) | 03/20/2018 | $ | (6,221,247 | ) | $ | (6,202,344 | ) | $ | 18,903 | |||||||
$ | (6,221,247 | ) | $ | (6,202,344 | ) | $ | 18,903 |
There is no variation margin due to or from the Fund as of December 31, 2017.
The accompanying notes are an integral part of these financial statements.
37
Brown Advisory Strategic Bond Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
For the six-month period ending December 31, 2017, the Brown Advisory Strategic Bond Fund Investor Shares (the “Fund”) gained 1.52% beating the 0.65% return for the Bloomberg Barclays Intermediate US Aggregate Bond Index (the “Index”), the Fund’s benchmark.
The Fund’s strategy is founded upon deep credit research that, in turn, feeds our proprietary risk pricing models–a process that we believe 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. 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; this hereby drives our capital allocation decisions from the bottom-up. We mitigate idiosyncratic risks through the consistent application of a sizing model focused on a bond’s estimated downside.
The Fund attempts to limit duration risk and has operated with a duration less than half that of the Index. As such, the Fund has been managed with a duration of roughly 1.5 over the past six months. As we have stated previously, we are not attempting to generate meaningful alpha by making a bet on the direction of interest rates. Instead, we aim to keep our sensitivity to interest rates low by buying shorter-dated bonds, using hedges such as Treasury futures, and by purchasing floating-rate instruments. Floating rate debt comprised 47.19% of fund assets at period-end.
The Fund’s gain came despite a negative return for the intermediate portion of the Treasury curve, which weighed on the performance of the Index. The Fund’s low duration, relatively higher yield and the strong performance of its corporate and corporate-backed bonds contributed to its outperformance versus the Index.
Structured products continue to account for the majority of our holdings, as the relative value offered by other sectors, such as corporate bonds, has not warranted any material change to our allocation. However, as the risk premia for lower-rated investments has continued its relentless grind lower, we have positioned the portfolio in favor of higher-rated and shorter-duration notes. 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 slightly increased its exposure to taxable municipal bonds as our team was able to identify pockets of value. Municipal bonds made up over 8.38% of the portfolio at period-end and constituted our second-best performing sector after returning approximately 2.55% during the period.
Despite the continued use of structured products, we expect that the bulk of our alpha will be driven by investments in corporate bonds. Indeed, the Fund’s corporate bonds returned a positive 1.84% versus 1.21% for the Index. That said, despite the low volatility and low default rates that continue to characterize the corporate bond markets, the risk premium offered by corporate bonds is nearing historical lows. As a result, our high yield exposure ended the period at approximately 16.97%, meaningfully below our maximum allocation of 50%.
Our investment process focuses on maximizing risk-adjusted return through the consistent and disciplined application of a deep due diligence process and proprietary risk pricing models designed to optimize capital allocation decisions. Today’s environment has been characterized by historically low risk premiums, making it all the more important that we do not deviate from our core tenets. Therefore, we will continue lending against stable or improving cash flows that we expect to remain solvent through an entire business cycle, that offer good structures that protect recoveries and that are cushioned by strong enterprise value coverage. We believe our disciplined credit process can add value whether credit is widening or tightening, and that this has the potential be a key driver of performance going forward.
Sincerely,
Robert H. Snyder
Portfolio Manager
Thomas D.D. Graff, CFA
Portfolio Manager
38
Brown Advisory Strategic Bond Fund
A Message to Our Shareholders
December 31, 2017
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. Bond ratings are grades given to bonds that indicate their credit quality as determined by a private independent rating service such as Standard & Poor’s. The firm evaluates a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion. Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade. In limited situations when the rating agency has not issued a formal rating, the Adviser will classify the security as non-rated.
Diversification does not assure a profit or protect against loss in a declining market.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
39
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Asset Backed Securities — 45.4% | ||||||||||||
181,825 | Aircraft Certificate Owner Trust, Series 2003-1A E^ | 7.00 | % | 09/20/2022 | 192,735 | |||||||
203,951 | Ally Auto Receivables Trust, Series 2015-1 A3 | 1.39 | % | 09/16/2019 | 203,779 | |||||||
200,000 | American Credit Acceptance Receivables Trust, Series 2017-3 B^ | 2.25 | % | 01/11/2021 | 199,334 | |||||||
300,000 | American Credit Acceptance Receivables Trust, Series 2017-2 B^ | 2.46 | % | 04/12/2021 | 299,750 | |||||||
150,000 | American Credit Acceptance Receivables Trust, Series 2015-1 C^ | 4.29 | % | 04/12/2021 | 151,499 | |||||||
350,000 | American Credit Acceptance Receivables Trust, Series 2017-3 C^ | 2.72 | % | 06/10/2022 | 348,442 | |||||||
650,000 | American Credit Acceptance Receivables Trust, Series 2017-4 C^ | 2.94 | % | 01/10/2024 | 650,257 | |||||||
3,493 | AmeriCredit Automobile Receivables Trust, Series 2014-2 B | 1.60 | % | 07/08/2019 | 3,492 | |||||||
1,033 | AmeriCredit Automobile Receivables Trust, Series 2013-4 C | 2.72 | % | 09/09/2019 | 1,034 | |||||||
664,821 | AmeriCredit Automobile Receivables Trust, Series 2014-3 B | 1.92 | % | 11/08/2019 | 664,897 | |||||||
205,000 | AmeriCredit Automobile Receivables Trust, Series 2014-2 C | 2.18 | % | 06/08/2020 | 205,136 | |||||||
555,000 | AmeriCredit Automobile Receivables Trust, Series 2015-2 C | 2.40 | % | 01/08/2021 | 556,630 | |||||||
139,685 | Bayview Opportunity Master Fund IIIa Trust, Series 2017-RN7 A1ʭ^ | 3.10 | % | 09/28/2032 | 139,754 | |||||||
73,250 | Bayview Opportunity Master Fund IVb Trust, Series 2017-NPL1 A1ʭ^ | 3.60 | % | 01/28/2032 | 73,521 | |||||||
222,454 | Bayview Opportunity Master Fund IVb Trust, Series 2017-SPL4 A#^ | 3.50 | % | 01/28/2055 | 226,184 | |||||||
500,000 | BlueMountain CLO, Ltd., Series 2013-3A DR (3 Month LIBOR USD + 2.90%)^ | 4.28 | % | 10/29/2025 | 501,160 | |||||||
1,000,000 | BlueMountain CLO, Ltd., Series 2014-1 (3 Month LIBOR USD + 3.45%)^ | 4.83 | % | 04/30/2026 | 1,003,486 | |||||||
650,000 | BlueMountain CLO, Ltd., Series 2015-2 (3 Month LIBOR USD + 1.85%)^ | 3.20 | % | 07/18/2027 | 653,585 | |||||||
750,000 | BlueMountain CLO, Ltd., Series 2015-2A D (3 Month LIBOR USD + 3.55%)^ | 4.90 | % | 07/19/2027 | 755,752 | |||||||
1,500,000 | BlueMountain CLO, Ltd., Series 2015-3A B (3 Month LIBOR USD + 3.10%)^ | 4.46 | % | 10/20/2027 | 1,508,974 | |||||||
146,450 | BRE Grand Islander Timeshare Issuer LLC, Series 2017-1A A^ | 2.94 | % | 05/25/2029 | 145,602 | |||||||
569,074 | Capital Auto Receivables Asset Trust, Series 2014-3 B^ | 2.35 | % | 07/22/2019 | 569,331 | |||||||
1,000,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2014-1A BR (3 Month LIBOR USD + 1.80%)^ | 3.15 | % | 04/17/2025 | 1,001,793 | |||||||
1,000,000 | CBAM, Ltd., Series 2017-1A B (3 Month LIBOR USD + 1.80%)^ | 3.13 | % | 07/20/2030 | 1,004,557 | |||||||
200,683 | Continental Airlines Trust, Series 1999-1 A | 6.55 | % | 08/02/2020 | 205,700 | |||||||
86,072 | Continental Airlines Trust, Series 2000-1 A-1 | 8.05 | % | 05/01/2022 | 95,002 | |||||||
175,000 | CPS Auto Receivables Trust, Series 2017-B B^ | 2.33 | % | 05/17/2021 | 174,491 | |||||||
200,000 | CPS Auto Receivables Trust, Series 2017-A B^ | 2.68 | % | 05/17/2021 | 200,308 | |||||||
1,000,000 | Dell Equipment Finance Trust, Series 2015-2 B^ | 2.21 | % | 09/22/2020 | 1,000,198 | |||||||
345,000 | Drive Auto Receivables Trust, Series 2017-BA B^ | 2.20 | % | 05/15/2020 | 345,646 | |||||||
470,000 | Drive Auto Receivables Trust, Series 2017-AA B^ | 2.51 | % | 01/15/2021 | 471,369 | |||||||
600,000 | Drive Auto Receivables Trust, Series 2016-A^ | 3.91 | % | 05/17/2021 | 604,559 | |||||||
350,000 | Drive Auto Receivables Trust, Series 2017-AA C^ | 2.98 | % | 01/18/2022 | 352,467 | |||||||
400,000 | Drive Auto Receivables Trust, Series 2017-1 | 2.84 | % | 04/15/2022 | 401,924 | |||||||
600,000 | Drive Auto Receivables Trust, Series 2017-2 C | 2.75 | % | 09/15/2023 | 601,099 | |||||||
2,334 | DT Auto Owner Trust, Series 2016-1A B^ | 2.79 | % | 05/15/2020 | 2,334 | |||||||
175,000 | DT Auto Owner Trust, Series 2017-3A C^ | 3.01 | % | 05/15/2023 | 175,356 | |||||||
800,000 | DT Auto Owner Trust, Series 2017-4^ | 2.86 | % | 07/17/2023 | 800,506 | |||||||
476,634 | Federal Express Corp., Series 1998-1 | 6.72 | % | 07/15/2023 | 515,361 | |||||||
19,053 | Flagship Credit Auto Trust, Series 2016-3 A1^ | 1.61 | % | 12/16/2019 | 19,042 | |||||||
235,551 | Flagship Credit Auto Trust, Series 2014-2 B^ | 2.84 | % | 11/16/2020 | 236,202 | |||||||
1,000,000 | GoldenTree Loan Management CLO, Ltd., Series 2017-1A C (3 Month LIBOR USD + 2.20%)^ | 3.56 | % | 04/20/2029 | 1,006,753 | |||||||
1,000,000 | Grippen Park CLO, Ltd., Series 2017-1A C (3 Month LIBOR USD + 2.30%)^ | 3.66 | % | 01/20/2030 | 1,007,674 | |||||||
1,500,000 | Highbridge Loan Management, Ltd., Series 4A-2014 A2A (3 Month LIBOR USD + 2.05%)^ | 3.43 | % | 07/28/2025 | 1,501,075 | |||||||
1,500,000 | Highbridge Loan Management, Ltd., Series 4A-2014 B (3 Month LIBOR USD + 3.00%)^ | 4.38 | % | 07/28/2025 | 1,501,709 | |||||||
1,000,000 | Highbridge Loan Management, Ltd., Series 7A-2015 D (3 Month LIBOR USD + 3.75%)^ | 5.17 | % | 11/15/2026 | 1,005,000 | |||||||
2,000,000 | Highbridge Loan Management, Ltd., Series 6A-2015 C (3 Month LIBOR USD + 3.07%)^ | 4.46 | % | 05/05/2027 | 2,002,944 | |||||||
1,975,000 | Highbridge Loan Management, Ltd., Series 2013-2 (3 Month LIBOR USD + 1.63%)^ | 2.99 | % | 10/20/2029 | 1,979,327 | |||||||
39,225 | Hilton Grand Vacations Trust, Series 2013-A A^ | 2.28 | % | 01/25/2026 | 38,961 | |||||||
125,624 | Hilton Grand Vacations Trust, Series 2017-AA A^ | 2.66 | % | 12/26/2028 | 124,820 | |||||||
300,000 | Invitation Homes Trust, Series 2017-SFR2 B (1 Month LIBOR USD + 1.15%)^ | 2.64 | % | 12/19/2036 | 301,191 | |||||||
200,000 | Invitation Homes Trust, Series 2017-SFR2 C (1 Month LIBOR USD + 1.45%)^ | 2.94 | % | 12/19/2036 | 201,665 | |||||||
930,000 | LCM XXV, Ltd., Series 2017-25 (3 Month LIBOR USD + 2.30%)^ | 3.00 | % | 07/22/2030 | 942,826 | |||||||
1,000,000 | Madison Park Funding XIII, Ltd., Series 2014-13R D-R (3 Month LIBOR USD + 3.27%)^ | 4.63 | % | 01/21/2025 | 1,008,324 | |||||||
750,000 | Madison Park Funding XVII, Ltd., Series 2015-17A B1R (3 Month LIBOR USD + 1.75%)^ | 3.11 | % | 07/21/2030 | 757,318 | |||||||
700,000 | Madison Park Funding XVII, Ltd., Series 2015-17A CR (3 Month LIBOR USD + 2.40%)^ | 3.76 | % | 07/22/2030 | 709,897 |
The accompanying notes are an integral part of these financial statements.
40
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Asset Backed Securities — 45.4% (Continued) | ||||||||||||
1,000,000 | Madison Park Funding XXV, Ltd., Series 2017-25A B (3 Month LIBOR USD + 2.35%)^ | 3.79 | % | 04/25/2029 | 1,007,793 | |||||||
1,000,000 | Magnetite IX, Ltd., Series 2014-9A BR (3 Month LIBOR USD + 2.00%)^ | 3.37 | % | 07/25/2026 | 1,006,046 | |||||||
750,000 | Magnetite IX, Ltd., Series 2014-9A CR (3 Month LIBOR USD + 3.10%)^ | 4.47 | % | 07/25/2026 | 755,748 | |||||||
139,174 | MVW Owner Trust, Series 2013-1A A^ | 2.15 | % | 04/22/2030 | 137,440 | |||||||
310,881 | MVW Owner Trust, Series 2015-1A A^ | 2.52 | % | 12/20/2032 | 309,502 | |||||||
239,880 | MVW Owner Trust, Series 2016-1A A^ | 2.25 | % | 12/20/2033 | 237,348 | |||||||
96,129 | MVW Owner Trust, Series 2017-1A A^ | 2.42 | % | 12/20/2034 | 95,337 | |||||||
96,129 | MVW Owner Trust, Series 2017-1A B^ | 2.75 | % | 12/20/2034 | 95,137 | |||||||
222,244 | Nationstar HECM Loan Trust, Series 2017-1 A^ | 1.97 | % | 05/25/2027 | 221,908 | |||||||
200,000 | Nationstar HECM Loan Trust, Series 2017-2A M1#^ | 2.82 | % | 09/25/2027 | 200,594 | |||||||
61,877 | Nissan Auto Receivables Owner Trust, Series 2013-C | 1.30 | % | 06/15/2020 | 61,842 | |||||||
1,000,000 | Octagon Investment Partners 24, Ltd., Series 2015-1A A2AR (3 Month LIBOR USD + 1.35%)^ | 2.79 | % | 05/21/2027 | 1,000,260 | |||||||
1,000,000 | Octagon Investment Partners 30, Ltd., Series 2017-1A B (3 Month LIBOR USD + 2.35%)^ | 3.71 | % | 03/17/2030 | 1,009,690 | |||||||
1,000,000 | Octagon Investment Partners XIV, Ltd., Series 2012-1A CR (3 Month LIBOR USD + 4.00%)^ | 5.36 | % | 07/15/2029 | 1,032,279 | |||||||
500,000 | Octagon Investment Partners XIX, Ltd., Series 2014-1A CR (3 Month LIBOR USD + 2.10%)^ | 3.46 | % | 04/15/2026 | 503,587 | |||||||
1,000,000 | Octagon Investment Partners XVI, Ltd., Series 2013-1A D (3 Month LIBOR USD + 3.35%)^ | 4.70 | % | 07/17/2025 | 1,003,161 | |||||||
2,000,000 | Octagon Investment Partners XXII, Ltd., Series 2014-1A D1R (3 Month LIBOR USD + 3.30%)^ | 4.66 | % | 11/25/2025 | 2,027,066 | |||||||
138,198 | Orange Lake Timeshare Trust, Series 2016-A A^ | 2.61 | % | 03/08/2029 | 137,240 | |||||||
150,000 | OSCAR U.S. Funding Trust, Series 2014-1A A4^ | 2.55 | % | 12/15/2021 | 150,031 | |||||||
25,302 | OSCAR U.S. Funding Trust V, Series 2016-2A A2B (1 Month LIBOR USD + 1.40%)^ | 2.88 | % | 11/15/2019 | 25,395 | |||||||
134,213 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2B (1 Month LIBOR USD + 0.80%)^ | 2.23 | % | 05/11/2020 | 134,434 | |||||||
434,220 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2A^ | 2.30 | % | 05/11/2020 | 434,278 | |||||||
200,000 | OSCAR U.S. Funding Trust VII LLC, Series 2017-2A A2B (1 Month LIBOR USD + 0.65%)^ | 2.08 | % | 11/10/2020 | 200,295 | |||||||
500,000 | OZLM XII, Ltd., Series 2015-12A C (3 Month LIBOR USD + 3.70%)^ | 5.08 | % | 04/30/2027 | 503,968 | |||||||
1,000,000 | OZLM XIII, Ltd., Series 2015-13A A2 (3 Month LIBOR USD + 2.10%)^ | 3.48 | % | 07/30/2027 | 1,008,484 | |||||||
64,068 | Prestige Auto Receivables Trust, Series 2014-1A B^ | 1.91 | % | 04/15/2020 | 64,072 | |||||||
13,353 | Prestige Auto Receivables Trust, Series 2015-1 A3^ | 1.53 | % | 02/15/2021 | 13,351 | |||||||
1,000,000 | Regatta Funding L.P., Series 2013-2A BR (3 Month LIBOR USD + 2.90%)^ | 4.26 | % | 01/15/2029 | 1,012,069 | |||||||
1,500,000 | Regatta III Funding, Ltd., Series 2014-1A A2R (3 Month LIBOR USD + 1.50%)^ | 2.86 | % | 04/15/2026 | 1,501,589 | |||||||
750,000 | Regatta III Funding, Ltd., Series 2014-1A CR (3 Month LIBOR USD + 3.30%)^ | 4.66 | % | 04/15/2026 | 750,274 | |||||||
22,004 | Santander Drive Auto Receivables Trust, Series 2014-1 C | 2.36 | % | 04/15/2020 | 22,013 | |||||||
126,139 | Santander Drive Auto Receivables Trust, Series 2015-4 B | 2.26 | % | 06/15/2020 | 126,190 | |||||||
400,000 | Santander Drive Auto Receivables Trust, Series 2016-1 B | 2.47 | % | 12/15/2020 | 400,738 | |||||||
400,000 | Santander Drive Auto Receivables Trust, Series 2017-2 C | 2.79 | % | 08/15/2022 | 401,481 | |||||||
135,022 | Sierra Timeshare Receivables Funding LLC, Series 2014-3A A^ | 2.30 | % | 10/20/2031 | 134,593 | |||||||
53,524 | Sierra Timeshare Receivables Funding LLC, Series 2015-2A A^ | 2.43 | % | 06/20/2032 | 53,275 | |||||||
53,592 | Sierra Timeshare Receivables Funding LLC, Series 2015-3A A^ | 2.58 | % | 09/20/2032 | 53,580 | |||||||
50,841 | Sierra Timeshare Receivables Funding LLC, Series 2016-2A A^ | 2.33 | % | 07/20/2033 | 50,475 | |||||||
72,792 | Sierra Timeshare Receivables Funding LLC, Series 2016-3A A^ | 2.43 | % | 10/20/2033 | 72,433 | |||||||
121,089 | Sierra Timeshare Receivables Funding LLC, Series 2017-1A A^ | 2.91 | % | 03/20/2034 | 121,384 | |||||||
270,208 | Southwest Airlines Co., Series 2007-1 | 6.15 | % | 02/01/2024 | 294,270 | |||||||
1,000,000 | Stewart Park CLO, Ltd., Series 2015-1A B (3 Month LIBOR USD + 2.00%)^ | 3.36 | % | 04/15/2026 | 1,000,146 | |||||||
1,000,000 | Stewart Park CLO, Ltd., Series 2015-1A C (3 Month LIBOR USD + 2.90%)^ | 4.26 | % | 04/15/2026 | 1,000,148 | |||||||
25,426 | U.S. Airways Pass Through Trust, Series 1999-1 A | 8.36 | % | 07/20/2020 | 25,934 | |||||||
375,000 | Verizon Owner Trust, Series 2016-1A A^ | 1.42 | % | 01/20/2021 | 373,006 | |||||||
45,659 | VOLT LIV LLC, Series 2017-NPL1 A1ʭ^ | 3.50 | % | 02/25/2047 | 45,839 | |||||||
150,932 | VOLT LIX LLC, Series 2017-NPL6 A1ʭ^ | 3.25 | % | 05/28/2047 | 151,686 | |||||||
111,612 | VOLT LV LLC, Series 2017-NPL2 A1ʭ^ | 3.50 | % | 03/25/2047 | 112,299 | |||||||
195,186 | VOLT LVI LLC, Series 2017-NPL3 A1ʭ^ | 3.50 | % | 03/25/2047 | 196,510 | |||||||
96,595 | VOLT LVII LLC, Series 2017-NPL4 A1ʭ^ | 3.38 | % | 04/25/2047 | 97,218 | |||||||
127,926 | VOLT LVIII LLC, Series 2017-NPL5 A1ʭ^ | 3.38 | % | 05/28/2047 | 128,436 | |||||||
87,767 | VOLT LXI LLC, Series 2017-NPL8 A1ʭ^ | 3.13 | % | 06/25/2047 | 88,023 | |||||||
168,215 | VOLT LXII LLC, Series 2017-NPL9 A1ʭ^ | 3.13 | % | 09/25/2047 | 168,532 | |||||||
200,000 | VOLT LXIII LLC, Series 2017-NPL10ʭ^ | 3.00 | % | 10/25/2047 | 199,926 | |||||||
84,209 | VOLT XXXVIII LLC, Series 2015-NP12 A1ʭ^ | 3.88 | % | 09/25/2045 | 84,555 | |||||||
1,000,000 | Voya CLO, Ltd., Series 2016-3A C (3 Month LIBOR USD + 3.85%)^ | 5.20 | % | 10/18/2027 | 1,014,309 |
The accompanying notes are an integral part of these financial statements.
41
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Asset Backed Securities — 45.4% (Continued) | ||||||||||||
1,500,000 | Voya CLO, Ltd., Series 2013-1R (3 Month LIBOR USD + 1.55%)^ | 2.91 | % | 10/15/2030 | 1,507,895 | |||||||
74,786 | VSE VOI Mortgage LLC, Series 2016-A A^ | 2.54 | % | 07/20/2033 | 74,155 | |||||||
584,903 | Westlake Automobile Receivables Trust, Series 2016-3A A2^ | 1.42 | % | 10/15/2019 | 584,192 | |||||||
12,043 | Westlake Automobile Receivables Trust, Series 2015-1A C^ | 2.29 | % | 11/16/2020 | 12,044 | |||||||
175,000 | Westlake Automobile Receivables Trust, Series 2016-1A C^ | 3.29 | % | 09/15/2021 | 175,740 | |||||||
75,000 | Westlake Automobile Receivables Trust, Series 2016-3A B^ | 2.07 | % | 12/15/2021 | 74,778 | |||||||
75,000 | Westlake Automobile Receivables Trust, Series 2016-3A C^ | 2.46 | % | 01/18/2022 | 74,632 | |||||||
305,000 | Westlake Automobile Receivables Trust, Series 2017-1A C^ | 2.70 | % | 10/17/2022 | 305,122 | |||||||
375,000 | Westlake Automobile Receivables Trust, Series 2017-2A C^ | 2.59 | % | 12/15/2022 | 372,510 | |||||||
Total Asset Backed Securities (Cost $56,013,768) | 57,590,017 | |||||||||||
Mortgage Backed Securities — 25.8% | ||||||||||||
200,000 | BAMLL Commercial Mortgage Securities Trust, Series 2013-DSNY A | |||||||||||
(1 Month LIBOR USD + 1.05%)^ | 2.53 | % | 09/15/2026 | 200,485 | ||||||||
105,128 | Bayview Opportunity Master Fund IIIb Trust, Series 2017-CRT2 M | |||||||||||
(1 Month LIBOR USD + 2.00%)^ | 3.56 | % | 11/29/2027 | 105,390 | ||||||||
180,978 | Bayview Opportunity Master Fund IVb Trust, Series 2017-CRT1 M | |||||||||||
(1 Month LIBOR USD + 2.15%)^ | 3.71 | % | 10/25/2028 | 181,704 | ||||||||
250,000 | Chicago Skyscraper Trust, Series 2017-SKY B (1 Month LIBOR USD + 1.10%)^ | 2.58 | % | 02/15/2030 | 250,562 | |||||||
250,000 | Chicago Skyscraper Trust, Series 2017-SKY C (1 Month LIBOR USD + 1.25%)^ | 2.73 | % | 02/15/2030 | 250,877 | |||||||
74,646 | FHLMC PC, Pool# E0-1654 | 5.00 | % | 06/01/2019 | 76,160 | |||||||
48,425 | FHLMC PC, Pool# N3-1000 | 4.50 | % | 08/01/2033 | 50,911 | |||||||
804,123 | FHLMC REMIC, Series 4107† | 3.00 | % | 08/15/2027 | 168,441 | |||||||
70,777 | FHLMC REMIC, Series 3878 | 3.00 | % | 04/15/2041 | 71,235 | |||||||
1,917,982 | FHLMC REMIC, Series 4143† | 3.50 | % | 09/15/2042 | 226,658 | |||||||
1,098,347 | FHLMC REMIC, Series 4495† | 3.50 | % | 07/15/2045 | 201,436 | |||||||
335,000 | FHLMC SCRTT, Series 2016-1 M1#^ | 3.00 | % | 09/25/2055 | 325,876 | |||||||
88,520 | FHLMC STACR Debt Notes, Series 2013-DN2 (1 Month LIBOR USD + 1.45%) | 3.00 | % | 11/27/2023 | 88,615 | |||||||
667,795 | FHLMC STACR Debt Notes, Series 2014-HQ2 (1 Month LIBOR USD + 2.20%) | 3.75 | % | 09/25/2024 | 689,186 | |||||||
673,800 | FHLMC STACR Debt Notes, Series 2015-HQ2 (1 Month LIBOR USD + 1.95%) | 3.50 | % | 05/27/2025 | 689,554 | |||||||
59,301 | FHLMC STACR Debt Notes, Series 2015-DNA1 (1 Month LIBOR USD + 0.90%) | 2.45 | % | 10/25/2027 | 59,368 | |||||||
700,000 | FHLMC STACR Debt Notes, Series 2015-DNA1 (1 Month LIBOR USD + 1.85%) | 3.40 | % | 10/25/2027 | 717,286 | |||||||
746,577 | FHLMC STACR Debt Notes, Series 2015-DNA3 M2 (1 Month LIBOR USD + 2.85%) | 4.40 | % | 04/25/2028 | 772,839 | |||||||
500,000 | FHLMC STACR Debt Notes, Series 2016-DNA1 (1 Month LIBOR USD + 2.90%) | 4.45 | % | 07/25/2028 | 515,352 | |||||||
65,913 | FHLMC STACR Debt Notes, Series 2016-HQA1 (1 Month LIBOR USD + 1.75%) | 3.30 | % | 09/25/2028 | 66,048 | |||||||
273,885 | FHLMC STACR Debt Notes, Series 2016-DNA2 M2 (1 Month LIBOR USD + 2.20%) | 3.75 | % | 10/25/2028 | 277,718 | |||||||
549,361 | FHMS, Series K-J13 | 2.06 | % | 09/25/2021 | 547,724 | |||||||
295,672 | FHMS, Series K-J09 | 2.02 | % | 04/25/2022 | 293,451 | |||||||
288,353 | FHMS, Series K-021 | 1.60 | % | 01/25/2022 | 284,512 | |||||||
2,029,372 | FHMS, Series K-721#† | 0.34 | % | 08/25/2022 | 26,558 | |||||||
2,616,317 | FHMS, Series K-023#† | 1.28 | % | 08/25/2022 | 127,735 | |||||||
470,604 | FHMS, Series K-J07 | 1.53 | % | 09/25/2022 | 458,221 | |||||||
748,267 | FHMS, Series K-J17 | 2.40 | % | 10/25/2024 | 745,273 | |||||||
3,473,931 | FHMS, Series K-046#† | 0.38 | % | 03/25/2025 | 82,430 | |||||||
807,414 | FHMS, Series K-055#† | 1.37 | % | 03/25/2026 | 74,558 | |||||||
1,633,426 | FHMS, Series K-056#† | 1.27 | % | 05/25/2026 | 140,860 | |||||||
1,347,159 | FHMS, Series K-057#† | 1.19 | % | 07/25/2026 | 112,305 | |||||||
679,888 | FHMS, Series K-058#† | 0.93 | % | 08/25/2026 | 45,778 | |||||||
1,398,290 | FHMS, Series K-W03 X1#† | 0.85 | % | 06/25/2027 | 83,950 | |||||||
1,336,293 | FHMS, Series Q-004# | 2.66 | % | 01/25/2046 | 1,348,786 | |||||||
2,806 | FNMA, Pool# 673194 | 5.50 | % | 02/01/2018 | 2,806 | |||||||
2,087 | FNMA, Pool# 722057 | 5.50 | % | 07/01/2018 | 2,091 | |||||||
3,599 | FNMA, Pool# 931676 | 5.50 | % | 01/01/2019 | 3,633 | |||||||
8,100 | FNMA, Pool# 774887 | 5.50 | % | 05/01/2019 | 8,178 | |||||||
21,906 | FNMA, Pool# 794149 | 5.50 | % | 08/01/2019 | 22,194 | |||||||
31,782 | FNMA, Pool# 255359 | 5.50 | % | 09/01/2019 | 32,408 | |||||||
6,771 | FNMA, Pool# 778775 | 5.50 | % | 09/01/2019 | 6,846 |
The accompanying notes are an integral part of these financial statements.
42
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 25.8% (Continued) | ||||||||||||
28,136 | FNMA, Pool# 785732 | 5.50 | % | 11/01/2019 | 28,515 | |||||||
41,480 | FNMA, Pool# 255645 | 4.00 | % | 01/01/2020 | 42,709 | |||||||
46,605 | FNMA, Pool# AC0884 | 5.00 | % | 07/01/2020 | 47,471 | |||||||
10,270 | FNMA, Pool# 826868 | 5.50 | % | 08/01/2020 | 10,454 | |||||||
45,574 | FNMA, Pool# 879409 | 5.50 | % | 02/01/2021 | 47,139 | |||||||
23,202 | FNMA, Pool# 745562 | 5.50 | % | 04/01/2021 | 23,925 | |||||||
41,613 | FNMA, Pool# AD0230 | 5.50 | % | 05/01/2021 | 42,935 | |||||||
7,607 | FNMA, Pool# 745525 | 5.50 | % | 05/01/2021 | 7,864 | |||||||
8,810 | FNMA, Pool# 936481 | 5.50 | % | 07/01/2021 | 9,110 | |||||||
3,673 | FNMA, Pool# 889849 | 5.50 | % | 09/01/2021 | 3,720 | |||||||
10,888 | FNMA, Pool# 888555 | 5.50 | % | 09/01/2021 | 11,214 | |||||||
11,869 | FNMA, Pool# 908560 | 5.50 | % | 01/01/2022 | 12,197 | |||||||
7,675 | FNMA, Pool# 889716 | 5.50 | % | 10/01/2022 | 8,019 | |||||||
6,019 | FNMA, Pool# 889198 | 5.50 | % | 11/01/2022 | 6,213 | |||||||
56,852 | FNMA, Pool# 911073 | 5.50 | % | 12/01/2022 | 59,416 | |||||||
17,006 | FNMA, Pool# 972932 | 5.50 | % | 02/01/2023 | 17,680 | |||||||
84,224 | FNMA, Pool# 975076 | 6.00 | % | 09/01/2023 | 88,488 | |||||||
8,392 | FNMA, Pool# 995217 | 5.50 | % | 12/01/2023 | 8,772 | |||||||
27,278 | FNMA, Pool# 995460 | 5.50 | % | 12/01/2023 | 28,546 | |||||||
18,164 | FNMA, Pool# 930334 | 5.50 | % | 01/01/2024 | 19,297 | |||||||
10,307 | FNMA, Pool# AE0467 | 5.50 | % | 03/01/2024 | 10,822 | |||||||
417,290 | FNMA, Pool# BC4577 | 4.50 | % | 09/01/2024 | 440,114 | |||||||
9,450 | FNMA, Pool# AD0365 | 5.50 | % | 09/01/2024 | 9,871 | |||||||
73,322 | FNMA, Pool# AL1081 | 5.00 | % | 07/01/2025 | 75,598 | |||||||
44,305 | FNMA, Pool# AL0517 | 5.50 | % | 08/01/2025 | 46,336 | |||||||
330,183 | FNMA, Pool# 815323 (6 Month LIBOR USD + 1.54%) | 3.06 | % | 01/01/2035 | 342,459 | |||||||
265,044 | FNMA, Pool# 813714 (1 Year CMT Rate + 1.94%) | 3.26 | % | 01/01/2035 | 275,742 | |||||||
113,672 | FNMA, Pool# 910181 (12 Month LIBOR USD + 1.71%) | 3.45 | % | 03/01/2037 | 119,110 | |||||||
360,183 | FNMA, Pool# 915191 (12 Month LIBOR USD + 1.71%) | 3.46 | % | 04/01/2037 | 376,326 | |||||||
425,274 | FNMA, Pool# AL6262 (1 Year CMT Rate + 2.38%) | 3.83 | % | 04/01/2038 | 444,360 | |||||||
284,020 | FNMA, Pool# 965184 (12 Month LIBOR USD + 1.58%) | 3.33 | % | 09/01/2038 | 296,286 | |||||||
585,513 | FNMA, Pool# AU6230 | 5.00 | % | 09/01/2043 | 631,571 | |||||||
263,771 | FNMA, Pool# 947512 (12 Month LIBOR USD + 1.75%) | 3.50 | % | 09/01/2047 | 275,944 | |||||||
45,306 | FNMA CAS, Series 2013-C01 (1 Month LIBOR USD + 2.00%) | 3.55 | % | 10/25/2023 | 45,634 | |||||||
558,485 | FNMA CAS, Series 2014-C02 (1 Month LIBOR USD + 0.95%) | 2.50 | % | 05/28/2024 | 560,493 | |||||||
140,344 | FNMA CAS, Series 2016-C02 (1 Month LIBOR USD + 2.15%) | 3.70 | % | 09/25/2028 | 141,739 | |||||||
113,103 | FNMA REMIC Trust, Series 2002-16 | 6.00 | % | 04/25/2022 | 119,266 | |||||||
7,500,000 | FNMA, 2.5%, Due TBA January | 2.50 | % | 01/15/2032 | 7,488,867 | |||||||
7,500,000 | FNMA, 3.0%, Due TBA January | 3.00 | % | 01/15/2032 | 7,639,746 | |||||||
650,000 | FREMF Mortgage Trust, Series 2017-K729#^ | 3.67 | % | 11/25/2024 | 646,403 | |||||||
90,000 | FREMF Mortgage Trust, Series 2011-K10#^ | 4.62 | % | 11/25/2049 | 93,675 | |||||||
286,623 | GNMA, Pool# 004527M | 5.00 | % | 09/20/2024 | 308,244 | |||||||
589,726 | GNMA REMIC Trust, Series 2014-45 B1#† | 0.77 | % | 07/16/2054 | 27,661 | |||||||
505,773 | GNMA REMIC Trust, Series 2014-135 I0#† | 0.83 | % | 01/16/2056 | 25,182 | |||||||
504,749 | GNMA REMIC Trust, Series 2015-172 I0#† | 0.92 | % | 03/16/2057 | 30,768 | |||||||
664,773 | GNMA REMIC Trust, Series 2016-40 I0#† | 0.78 | % | 07/16/2057 | 38,625 | |||||||
539,692 | GNMA REMIC Trust, Series 2016-56 I0#† | 0.99 | % | 11/16/2057 | 38,768 | |||||||
605,483 | GNMA REMIC Trust, Series 2016-127 I0#† | 0.95 | % | 05/16/2058 | 44,959 | |||||||
646,332 | GNMA REMIC Trust, Series 2016-98 I0#† | 0.96 | % | 05/16/2058 | 46,022 | |||||||
615,433 | GNMA REMIC Trust, Series 2016-110 I0#† | 1.04 | % | 05/16/2058 | 50,083 | |||||||
200,000 | JPMCC, Series 2016-ASH A (1 Month LIBOR USD + 1.50%)^ | 2.98 | % | 10/16/2034 | 200,568 | |||||||
185,000 | MAD Mortgage Trust, Series 2017-330M B#^ | 3.37 | % | 08/17/2034 | 186,294 | |||||||
200,000 | MSC, Series 2017-PRME B (1 Month LIBOR USD + 1.35%)^ | 2.83 | % | 02/15/2034 | 200,538 | |||||||
275,000 | MSC, Series 2017-CLS C (1 Month LIBOR USD + 1.00%)^ | 2.25 | % | 11/15/2034 | 275,212 | |||||||
175,000 | MSC, Series 2017-CLS D (1 Month LIBOR USD + 1.40%)^ | 2.65 | % | 11/15/2034 | 175,250 | |||||||
Total Mortgage Backed Securities (Cost $33,583,266) | 32,688,218 |
The accompanying notes are an integral part of these financial statements.
43
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Corporate Bonds & Notes — 24.7% | ||||||||||||
250,000 | Activision Blizzard, Inc.^ | 6.13 | % | 09/15/2023 | 265,078 | |||||||
400,000 | AerCap Ireland Capital DAC | 3.50 | % | 05/26/2022 | 406,348 | |||||||
750,000 | AK Steel Corp. | 7.50 | % | 07/15/2023 | 815,625 | |||||||
100,000 | AK Steel Corp. | 6.38 | % | 10/15/2025 | 99,500 | |||||||
750,000 | Allison Transmission, Inc.^ | 4.75 | % | 10/01/2027 | 756,563 | |||||||
600,000 | American Tower Corp. | 3.40 | % | 02/15/2019 | 606,964 | |||||||
310,000 | Analog Devices, Inc. | 3.90 | % | 12/15/2025 | 324,609 | |||||||
300,000 | Asbury Automotive Group, Inc. | 6.00 | % | 12/15/2024 | 313,860 | |||||||
600,000 | Ball Corp. | 5.00 | % | 03/15/2022 | 642,750 | |||||||
300,000 | Broadcom Corp.^ | 3.88 | % | 01/15/2027 | 295,771 | |||||||
500,000 | Canadian Natural Resources, Ltd. | 3.85 | % | 06/01/2027 | 511,316 | |||||||
300,000 | Capital One Financial Corp. (3 Month LIBOR USD + 3.80%) | 5.55 | % | 12/29/2049 | 311,250 | |||||||
263,000 | Carrizo Oil & Gas, Inc. | 7.50 | % | 09/15/2020 | 268,260 | |||||||
350,000 | Carrizo Oil & Gas, Inc. | 6.25 | % | 04/15/2023 | 364,875 | |||||||
500,000 | Caterpillar Financial Services Corp. (3 Month LIBOR USD + 0.59%) | 2.10 | % | 06/06/2022 | 504,287 | |||||||
500,000 | Clorox Co. | 3.10 | % | 10/01/2027 | 497,662 | |||||||
200,000 | CommScope Technologies LLC^ | 6.00 | % | 06/15/2025 | 213,500 | |||||||
100,000 | CommScope Technologies LLC^ | 5.00 | % | 03/15/2027 | 100,250 | |||||||
400,000 | Core & Main L.P.^ | 6.13 | % | 08/15/2025 | 407,000 | |||||||
250,000 | Cornerstone Chemical Co.^ | 6.75 | % | 08/15/2024 | 250,000 | |||||||
620,000 | Crown Castle International Corp. | 4.88 | % | 04/15/2022 | 665,510 | |||||||
300,000 | Dana, Inc. | 6.00 | % | 09/15/2023 | 314,250 | |||||||
250,000 | Delphi Technologies PLC^ | 5.00 | % | 10/01/2025 | 253,750 | |||||||
600,000 | Digital Realty Trust L.P. | 3.70 | % | 08/15/2027 | 605,583 | |||||||
400,000 | Dollar General Corp. | 4.15 | % | 11/01/2025 | 424,109 | |||||||
650,000 | Dollar Tree, Inc. | 5.75 | % | 03/01/2023 | 682,094 | |||||||
500,000 | Ecolab, Inc. | 2.00 | % | 01/14/2019 | 499,296 | |||||||
300,000 | Education Realty Operating Partnership L.P. | 4.60 | % | 12/01/2024 | 312,449 | |||||||
400,000 | Energy Transfer Partners L.P. (3 Month LIBOR USD + 4.03%) | 6.25 | % | 05/15/2023 | 389,250 | |||||||
500,000 | Equinix, Inc. | 5.88 | % | 01/15/2026 | 538,125 | |||||||
380,000 | Equinix, Inc. | 5.38 | % | 05/15/2027 | 407,550 | |||||||
400,000 | First Quality Finance Co., Inc.^ | 5.00 | % | 07/01/2025 | 409,000 | |||||||
500,000 | Harris Corp. | 3.83 | % | 04/27/2025 | 518,967 | |||||||
300,000 | HCA, Inc. | 5.88 | % | 02/15/2026 | 318,000 | |||||||
200,000 | Healthcare Trust of America Holdings L.P. | 3.75 | % | 07/01/2027 | 199,583 | |||||||
250,000 | High Ridge Brands Co.^ | 8.88 | % | 03/15/2025 | 223,750 | |||||||
450,000 | Hudbay Minerals, Inc.^ | 7.25 | % | 01/15/2023 | 479,250 | |||||||
300,000 | JB Hunt Transport Services, Inc. | 2.40 | % | 03/15/2019 | 300,407 | |||||||
300,000 | Keysight Technologies, Inc. | 4.55 | % | 10/30/2024 | 318,725 | |||||||
500,000 | Kinross Gold Corp. | 5.95 | % | 03/15/2024 | 550,625 | |||||||
325,000 | Koppers, Inc.^ | 6.00 | % | 02/15/2025 | 345,313 | |||||||
710,000 | Lamar Media Corp. | 5.75 | % | 02/01/2026 | 760,588 | |||||||
340,000 | Land O’ Lakes, Inc.^ | 7.25 | % | 07/14/2027 | 371,450 | |||||||
1,000,000 | Martin Marietta Materials, Inc. (3 Month LIBOR USD + 0.50%) | 2.13 | % | 12/20/2019 | 1,001,917 | |||||||
400,000 | Martin Marietta Materials, Inc. | 4.25 | % | 07/02/2024 | 421,324 | |||||||
275,000 | Mercer International, Inc. | 7.75 | % | 12/01/2022 | 291,500 | |||||||
250,000 | Mercer International, Inc. | 6.50 | % | 02/01/2024 | 266,250 | |||||||
450,000 | Meritor, Inc. | 6.25 | % | 02/15/2024 | 475,875 | |||||||
450,000 | Micron Technology, Inc. | 5.50 | % | 02/01/2025 | 473,063 | |||||||
300,000 | MPLX L.P. | 5.50 | % | 02/15/2023 | 309,099 | |||||||
350,000 | MPLX L.P. | 4.88 | % | 12/01/2024 | 377,803 | |||||||
350,000 | Mylan NV | 3.15 | % | 06/15/2021 | 352,233 | |||||||
400,000 | Mylan NV | 3.95 | % | 06/15/2026 | 404,049 | |||||||
300,000 | Mylan, Inc. | 2.60 | % | 06/24/2018 | 300,534 | |||||||
500,000 | Oasis Petroleum, Inc. | 6.50 | % | 11/01/2021 | 511,875 | |||||||
165,000 | Outfront Media Capital LLC | 5.88 | % | 03/15/2025 | 175,106 |
The accompanying notes are an integral part of these financial statements.
44
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Corporate Bonds & Notes — 24.7% (Continued) | |||||||||||||
1,057,000 | Regency Centers LP | 4.80 | % | 04/15/2021 | 1,117,390 | ||||||||
250,000 | Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp.^ | 6.13 | % | 08/15/2021 | 248,750 | ||||||||
232,000 | ServiceMaster Co. LLC | 7.45 | % | 08/15/2027 | 252,300 | ||||||||
450,000 | SESI LLC | 7.13 | % | 12/15/2021 | 461,813 | ||||||||
150,000 | Springs Industries, Inc. | 6.25 | % | 06/01/2021 | 153,375 | ||||||||
450,000 | Staples, Inc.^ | 8.50 | % | 09/15/2025 | 417,375 | ||||||||
370,000 | TechnipFMC PLC^ | 3.45 | % | 10/01/2022 | 369,767 | ||||||||
125,000 | Teck Resources, Ltd. | 3.75 | % | 02/01/2023 | 125,781 | ||||||||
530,000 | Teck Resources, Ltd.^ | 8.50 | % | 06/01/2024 | 600,225 | ||||||||
250,000 | Tenneco, Inc. | 5.00 | % | 07/15/2026 | 256,875 | ||||||||
250,000 | TransDigm, Inc. | 6.50 | % | 07/15/2024 | 256,875 | ||||||||
200,000 | United Rentals North America, Inc. | 5.50 | % | 07/15/2025 | 212,750 | ||||||||
200,000 | United Rentals North America, Inc. | 4.88 | % | 01/15/2028 | 201,500 | ||||||||
610,000 | Verisk Analytics, Inc. | 4.00 | % | 06/15/2025 | 631,780 | ||||||||
350,000 | Verizon Communications, Inc. (3 Month LIBOR USD + 1.00%)# | 2.60 | % | 03/16/2022 | 357,103 | ||||||||
350,000 | Versum Materials, Inc.^ | 5.50 | % | 09/30/2024 | 375,375 | ||||||||
525,000 | Viking Cruises, Ltd.^ | 5.88 | % | 09/15/2027 | 535,500 | ||||||||
1,000,000 | Vulcan Materials Co. (3 Month LIBOR USD + 0.60%)# | 2.19 | % | 06/15/2020 | 1,001,066 | ||||||||
500,000 | Whiting Petroleum Corp.^ | 6.63 | % | 01/15/2026 | 510,625 | ||||||||
Total Corporate Bonds & Notes (Cost $31,381,291) | 31,289,945 | ||||||||||||
Municipal Bonds — 7.8% | |||||||||||||
1,500,000 | District of Columbia# | 3.92 | % | 08/01/2038 | 1,395,525 | ||||||||
1,000,000 | Geisinger Authority# | 1.60 | % | 10/01/2043 | 1,000,000 | ||||||||
1,100,000 | Georgetown University# | 2.46 | % | 04/01/2029 | 1,042,866 | ||||||||
750,000 | Massachusetts Port Authority# | 2.54 | % | 01/01/2031 | 710,797 | ||||||||
1,000,000 | New York City Water & Sewer System# | 1.61 | % | 06/15/2033 | 1,000,000 | ||||||||
1,000,000 | New York State Energy Research & Development Authority# | 3.92 | % | 07/01/2029 | 1,000,000 | ||||||||
640,000 | New York Transportation Development Corp. | 5.00 | % | 08/01/2026 | 688,736 | ||||||||
225,000 | North Texas Tollway Authority | 8.91 | % | 02/01/2030 | 252,650 | ||||||||
500,000 | Public Finance Authority^ | 5.00 | % | 09/01/2030 | 530,160 | ||||||||
1,000,000 | Triborough Bridge & Tunnel Authority# | 1.61 | % | 01/01/2032 | 1,000,000 | ||||||||
400,000 | Utah Charter School Finance Authority | 5.80 | % | 06/15/2038 | 400,760 | ||||||||
550,000 | Washington State Housing Finance Commission^ | 4.00 | % | 01/01/2024 | 540,183 | ||||||||
255,000 | Yamhill County Oregon Hospital Authority | 3.50 | % | 11/15/2020 | 253,307 | ||||||||
Total Municipal Bonds (Cost $9,779,351) | 9,814,984 | ||||||||||||
Preferred Stocks — 0.3% | |||||||||||||
2,400 | AGNC Investment Corp., Series B, 7.75% | 62,016 | |||||||||||
12,000 | Digital Realty Trust, Inc., Series J, 5.25% | 301,200 | |||||||||||
Total Preferred Stocks (Cost $361,102) | 363,216 | ||||||||||||
Closed-End Funds — 0.5% | |||||||||||||
17,204 | BlackRock MuniYield Michigan Quality Fund | 240,856 | |||||||||||
9,600 | Nuveen Massachusetts Quality Municipal Income Fund | 136,992 | |||||||||||
9,184 | Nuveen Michigan Quality Municipal Income Fund | 121,780 | |||||||||||
6,063 | Nuveen Pennsylvania Quality Municipal Income Fund | 79,728 | |||||||||||
5,168 | PIMCO New York Municipal Income Fund II | 62,016 | |||||||||||
Total Closed-End Funds (Cost $669,863) | 641,372 | ||||||||||||
Exchange Traded Funds — 3.5% | |||||||||||||
51,268 | iShares iBoxx $ High Yield Corporate Bond ETF | 4,473,645 | |||||||||||
Total Exchange Traded Funds (Cost $4,421,401) | 4,473,645 |
The accompanying notes are an integral part of these financial statements.
45
Brown Advisory Strategic Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par | ||||||||
Value/Shares | Security Description | Value $ | ||||||
Short-Term Investments — 2.3% | ||||||||
Money Market Funds — 2.2% | ||||||||
2,774,761 | First American Treasury Obligations Fund — Class Z, 1.18%* | 2,774,761 | ||||||
U.S. Treasury Bills — 0.1% | ||||||||
100,000 | United States Treasury Bill | 99,796 | ||||||
Total Short-Term Investments (Cost $2,874,558) | 2,874,557 | |||||||
Total Investments — 110.3% (Cost $139,084,600) | 139,735,954 | |||||||
Liabilities in Excess of Other Assets — (10.3)% | (13,101,983 | ) | ||||||
NET ASSETS — 100.0% | $ | 126,633,971 |
PORTFOLIO HOLDING | ||||
% of Net Assets | ||||
Asset Backed Securities | 45.4 | % | ||
Mortgage Backed Securities | 25.8 | % | ||
Corporate Bonds & Notes | 24.7 | % | ||
Municipal Bonds | 7.8 | % | ||
Exchange Traded Funds | 3.5 | % | ||
Money Market Funds | 2.2 | % | ||
Closed-End Funds | 0.5 | % | ||
Preferred Stocks | 0.3 | % | ||
U.S. Treasury Bills | 0.1 | % | ||
Other Assets and Liabilities | (10.3 | )% | ||
100.0 | % |
# | Variable rate security. Rate disclosed is as of December 31, 2017. | |
ʭ | Step bond; the interest rate shown is the rate in effect as of December 31, 2017. | |
^ | 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, 2017, the value of these securities amounted to $64,394,964 or 50.9% of net assets. | |
† | Interest Only Security | |
* | Annualized seven-day yield as of December 31, 2017. |
Futures Contracts — Short (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury 5-Year Note Futures March 2018 | (147 | ) | 03/29/2018 | $ | (17,122,519 | ) | $ | (17,076,117 | ) | $ | 46,402 | ||||||
$ | (17,122,519 | ) | $ | (17,076,117 | ) | $ | 46,402 |
There is no variation margin due to or from the Fund as of December 31, 2017.
The accompanying notes are an integral part of these financial statements.
46
Brown Advisory Sustainable Bond Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
Brown Advisory Sustainable Bond Fund (the “Fund”) commenced operations on August 7, 2017. During the period from August 7, 2017 to December 31, 2017 the Fund was up 0.24%, modestly behind the 0.58% return for its benchmark, the Bloomberg Barclays US Aggregate Bond Index, for the same time period.
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. Duration and sector weightings are set mainly by an analysis of the intermediate-term risk/reward, as opposed to any particular macro forecast.
Over this period, credit spreads generally moved tighter as confidence in global growth improved. This was mostly a benefit to the Fund’s performance as both corporate bonds and taxable municipal bonds were the biggest contributors; the Fund was overweight to both.
Among our stronger performing individual selections were Northwell Healthcare, Northwestern University, Keysight Technology, Tenneco and Education Realty.
Yield curve positioning was also a mild positive. While longer-term bond yields were relatively unchanged during this period, short-term rates rose meaningfully as expectations increased for rate hikes by the Federal Reserve. We were mostly underweight 2-7 year bonds, which added roughly 12bps to relative performance.
The last six months has been a period of low volatility and favorable spread movements. This has also been a period where a rising tide is lifting all boats. While we cannot hope to guess the timing, we believe that, at some point, the business cycle will turn. Rate volatility and wider credit spreads would accompany any slowdown. At that time, we believe our disciplined and consistent process has the potential to really shine. Until then, we will look for individual bond ideas that can perform well in a steady state, while attempting to protect our downside should things change.
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.
47
Brown Advisory Sustainable Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Corporate Bonds & Notes — 38.1% | |||||||||||||
165,000 | Albemarle Corp. | 4.15 | % | 12/01/2024 | 175,088 | ||||||||
255,000 | Allison Transmission, Inc.^ | 4.75 | % | 10/01/2027 | 257,231 | ||||||||
345,000 | American Tower Corp. | 3.13 | % | 01/15/2027 | 332,794 | ||||||||
230,000 | Analog Devices, Inc. | 3.90 | % | 12/15/2025 | 240,839 | ||||||||
128,000 | AvalonBay Communities, Inc. | 3.63 | % | 10/01/2020 | 131,812 | ||||||||
230,000 | Ball Corp. | 5.00 | % | 03/15/2022 | 246,388 | ||||||||
405,000 | Bank of America Corp. | 1.95 | % | 05/12/2018 | 405,053 | ||||||||
290,000 | Boston Properties L.P. | 3.65 | % | 02/01/2026 | 295,106 | ||||||||
159,000 | Campbell Soup Co. | 2.50 | % | 08/02/2022 | 157,426 | ||||||||
230,000 | Core & Main L.P.^ | 6.13 | % | 08/15/2025 | 234,025 | ||||||||
40,000 | Children’s Hospital Corp. | 4.12 | % | 01/01/2047 | 43,386 | ||||||||
230,000 | Clorox Co. | 3.10 | % | 10/01/2027 | 228,924 | ||||||||
115,000 | Delphi Technologies PLC^ | 5.00 | % | 10/01/2025 | 116,725 | ||||||||
230,000 | Digital Realty Trust L.P. | 3.95 | % | 07/01/2022 | 240,512 | ||||||||
353,000 | Ecolab, Inc. | 4.35 | % | 12/08/2021 | 376,076 | ||||||||
230,000 | Education Realty Operating Partnership L.P. | 4.60 | % | 12/01/2024 | 239,545 | ||||||||
430,000 | Equinix, Inc. | 5.88 | % | 01/15/2026 | 462,788 | ||||||||
30,000 | Equinix, Inc. | 5.38 | % | 05/15/2027 | 32,175 | ||||||||
175,000 | JB Hunt Transport Services, Inc. | 3.30 | % | 08/15/2022 | 177,454 | ||||||||
20,000 | Kaiser Foundation Hospitals | 3.15 | % | 05/01/2027 | 20,043 | ||||||||
345,000 | Keysight Technologies, Inc. | 4.55 | % | 10/30/2024 | 366,534 | ||||||||
290,000 | Land O’ Lakes, Inc.^ | 7.25 | % | 07/14/2027 | 316,825 | ||||||||
230,000 | MidAmerican Energy Co. | 3.10 | % | 05/01/2027 | 231,442 | ||||||||
405,000 | Morgan Stanley | 2.20 | % | 12/07/2018 | 405,556 | ||||||||
365,000 | Northwell Healthcare, Inc. | 4.26 | % | 11/01/2047 | 374,193 | ||||||||
475,000 | Northwestern University | 3.81 | % | 12/01/2050 | 482,864 | ||||||||
170,000 | Regency Centers L.P. | 3.75 | % | 06/15/2024 | 173,530 | ||||||||
115,000 | Staples, Inc.^ | 8.50 | % | 09/15/2025 | 106,663 | ||||||||
290,000 | Starbucks Corp. | 2.45 | % | 06/15/2026 | 279,876 | ||||||||
230,000 | Tenneco, Inc. | 5.00 | % | 07/15/2026 | 236,325 | ||||||||
460,000 | Toronto-Dominion Bank | 1.85 | % | 09/11/2020 | 455,092 | ||||||||
300,000 | Trustees of the University of Pennsylvania | 4.01 | % | 08/15/2047 | 302,532 | ||||||||
290,000 | Verisk Analytics, Inc. | 4.00 | % | 06/15/2025 | 300,354 | ||||||||
120,000 | William Marsh Rice University | 3.57 | % | 05/15/2045 | 122,549 | ||||||||
174,000 | Xylem, Inc. | 3.25 | % | 11/01/2026 | 173,415 | ||||||||
Total Corporate Bonds & Notes (Cost $8,765,884) | 8,741,140 | ||||||||||||
Municipal Bonds — 16.3% | |||||||||||||
100,000 | City & County of Honolulu Hawaii | 3.00 | % | 09/01/2027 | 98,452 | ||||||||
65,000 | Commonwealth of Massachusetts | 3.28 | % | 06/01/2046 | 62,904 | ||||||||
425,000 | District of Columbia# | 3.92 | % | 08/01/2038 | 395,399 | ||||||||
250,000 | Georgetown University# | 2.46 | % | 04/01/2029 | 237,015 | ||||||||
30,000 | Los Angeles Community College District | 6.60 | % | 08/01/2042 | 44,253 | ||||||||
45,000 | Maryland Community Development Administration | 3.24 | % | 09/01/2048 | 45,116 | ||||||||
365,000 | Miami-Dade Country Florida Aviation | 3.98 | % | 10/01/2041 | 374,005 | ||||||||
60,000 | New York State Dormitory Authority | 4.00 | % | 07/01/2039 | 62,050 | ||||||||
100,000 | Ohio Air Quality Development Authority^ | 3.75 | % | 01/15/2028 | 104,077 | ||||||||
475,000 | Oregon State University | 3.75 | % | 04/01/2049 | 477,052 | ||||||||
250,000 | Pennsylvania Economic Development | 3.20 | % | 11/15/2027 | 249,158 | ||||||||
600,000 | Permanent University Fund — Texas A&M University System | 3.66 | % | 07/01/2047 | 600,863 | ||||||||
20,000 | San Diego Redevelopment Agency Successor Agency | 4.00 | % | 09/01/2040 | 20,204 | ||||||||
60,000 | San Francisco, City of California Public Utilities Commission Water Revenue | 3.55 | % | 11/01/2031 | 60,493 | ||||||||
480,000 | Southern California Public Power Authority | 4.31 | % | 07/01/2029 | 518,567 | ||||||||
355,000 | University of California | 2.99 | % | 05/15/2026 | 354,954 | ||||||||
25,000 | University of North Texas | 3.69 | % | 04/15/2030 | 25,539 | ||||||||
Total Municipal Bonds (Cost $3,727,628) | 3,730,101 |
The accompanying notes are an integral part of these financial statements.
48
Brown Advisory Sustainable Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Mortgage Backed Securities — 14.2% | |||||||||||||
599,267 | FHMS, Series K-W03 X1#~ | 0.85 | % | 06/25/2027 | 35,979 | ||||||||
300,000 | FHMS, Series K-W03 A2 | 3.02 | % | 06/25/2027 | 302,034 | ||||||||
342,589 | FNMA, Pool# AS2826 | 4.00 | % | 07/01/2044 | 358,967 | ||||||||
323,196 | FNMA, Pool# AS3724 | 3.50 | % | 11/01/2044 | 332,110 | ||||||||
317,336 | FNMA, Pool# AS5917 | 3.50 | % | 10/01/2045 | 326,089 | ||||||||
491,903 | FNMA, Pool# AS6127 | 3.50 | % | 11/01/2045 | 505,470 | ||||||||
313,910 | FNMA, Pool# AS8808 | 3.50 | % | 02/01/2047 | 322,568 | ||||||||
300,000 | FNMA REMIC Trust, Series 2017-M10 AV2# | 2.56 | % | 07/25/2024 | 297,875 | ||||||||
291,000 | FNMA REMIC Trust, Series 2017-M13 A2# | 2.94 | % | 09/25/2027 | 293,545 | ||||||||
80,000 | FNMA REMIC Trust, Series 2017-M2 A2# | 2.78 | % | 02/25/2027 | 79,793 | ||||||||
200,000 | MSC, Series 2017-CLS A (1 Month LIBOR USD + 0.70%)^ | 1.95 | % | 11/15/2034 | 200,249 | ||||||||
100,000 | MSC, Series 2017-CLS C (1 Month LIBOR USD + 1.00%)^ | 2.25 | % | 11/15/2034 | 100,077 | ||||||||
100,000 | MSC, Series 2017-CLS D (1 Month LIBOR USD + 1.40%)^ | 2.65 | % | 11/15/2034 | 100,143 | ||||||||
Total Mortgage Backed Securities (Cost $3,272,630) | 3,254,899 | ||||||||||||
U.S. Treasury Notes — 2.6% | |||||||||||||
365,000 | United States Treasury Note | 0.75 | % | 02/28/2018 | 364,662 | ||||||||
235,000 | United States Treasury Note | 0.75 | % | 04/15/2018 | 234,601 | ||||||||
Total U.S. Treasury Notes (Cost $599,379) | 599,263 | ||||||||||||
Foreign Government Bonds — 14.9% | |||||||||||||
600,000 | Bank Nederlandse Gemeenten NV^ | 2.13 | % | 12/14/2020 | 598,275 | ||||||||
765,000 | European Bank for Reconstruction & Development | 0.88 | % | 07/22/2019 | 752,216 | ||||||||
705,000 | European Investment Bank | 2.38 | % | 05/24/2027 | 693,103 | ||||||||
460,000 | Export Development Canada | 1.25 | % | 12/10/2018 | 456,884 | ||||||||
460,000 | International Finance Corp. | 2.00 | % | 10/24/2022 | 453,793 | ||||||||
460,000 | Kreditanstalt fuer Wiederaufbau | 2.00 | % | 09/29/2022 | 452,879 | ||||||||
Total Foreign Government Bonds (Cost $3,425,990) | 3,407,150 | ||||||||||||
Short-Term Investments — 22.4% | |||||||||||||
Money Market Funds — 22.4% | |||||||||||||
5,120,581 | First American Treasury Obligations Fund — Class Z, 1.18%* | 5,120,581 | |||||||||||
Total Short-Term Investments (Cost $5,120,581) | 5,120,581 | ||||||||||||
Total Investments — 108.5% (Cost $24,912,092) | 24,853,134 | ||||||||||||
Liabilities in Excess of Other Assets — (8.5)% | (1,943,139 | ) | |||||||||||
NET ASSETS — 100.0% | $ | 22,909,995 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Corporate Bonds & Notes | 38.1 | % | ||
Money Market Funds | 22.4 | % | ||
Municipal Bonds | 16.3 | % | ||
Foreign Government Bonds | 14.9 | % | ||
Mortgage Backed Securities | 14.2 | % | ||
U.S. Treasury Notes | 2.6 | % | ||
Other Assets and Liabilities | (8.5 | )% | ||
100.0 | % |
# | Variable rate security. Rate disclosed is as of December 31, 2017. | |
* | Annualized seven-day yield as of December 31, 2017. | |
^ | 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, 2017, the value of these securities amounted to $2,134,290 or 9.3% of net assets. | |
~ | Interest Only Security |
The accompanying notes are an integral part of these financial statements.
49
Brown Advisory Sustainable Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Futures Contracts — Long (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury Long Bond Futures March 2018 | 12 | 03/20/2018 | $ | 1,835,964 | $ | 1,836,000 | $ | 36 | |||||||||
U.S. Treasury Ultra Bond Futures March 2018 | 5 | 03/20/2018 | 834,321 | 838,281 | 3,960 | ||||||||||||
$ | 2,670,285 | $ | 2,674,281 | $ | 3,996 | ||||||||||||
Futures Contracts — Short (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury 10-Year Ultra Futures March 2018 | (23) | 03/20/2018 | $ | (3,077,547 | ) | $ | (3,071,938 | ) | $ | 5,609 | |||||||
$ | (3,077,547 | ) | $ | (3,071,938 | ) | $ | 5,609 |
There is no variation margin due to or from the Fund as of December 31, 2017.
The accompanying notes are an integral part of these financial statements.
50
Brown Advisory Maryland Bond Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Maryland Bond Fund (the “Fund”) returned 0.99%. During the same period, the Bloomberg Barclays 1-10 Year Blended Municipal Blend Index, the Fund’s benchmark, increased 0.51%.
The Fund posted attractive relative performance for the six months ended December 31, 2017—a period where broad intermediate-term municipal bonds produced flat and, in some cases, negative total returns. The Fund benefitted from a combination of our bottom-up credit and sector selection, as well as the eventual increase in short-term municipal yields.
Following a tumultuous end to 2016, the municipal market began to find its footing in early 2017. However, continued policy uncertainty seemed to hang like a cloud over the market. As the year progressed, many investors sought refuge in the perceived safety of short-maturity bonds in an attempt to dampen volatility amidst the specter of U.S. federal tax reform and an active Fed tightening cycle. This flight-to-quality bid in short-maturity municipal securities temporarily suppressed yields on those bonds to levels that we viewed as unsustainable given investable alternatives. As a consequence, we actively avoided the poor risk/reward profile in two-to-five year fixed-rate bonds in favor of a large overweight in floating-rate securities and ultra-short callable bond structures.
These defensive positions greatly benefitted the Fund during the fourth quarter as short- and intermediate-term municipal yields began to normalize to higher levels. It seemed that after suffering much consternation around tax reform for much of the year, the tax exemptions most essential to the municipal bond market ended up basically unscathed in the final bill. To be clear, we do not attempt to predict political policy outcomes or specific interest rate movements. We instead took notice of the high valuations (on a risk-adjusted basis) of short-term fixed-rate bonds and sought other municipal structures that we believed offered a better risk/reward balance while remaining appropriate for the mandate.
Turning to credit, we again saw strong relative performance in many of our credit-sensitive revenue-backed sectors. Generic BBB-and-lower rated revenue-backed municipal securities sharply outperformed bonds with higher ratings for the period; but, our specific selection effect provided meaningful relative outperformance the broad market. Our health care holdings, for example, returned 2.92% for the period, contributing roughly 0.25% to the Fund’s relative outperformance. Dedicated tax revenue bonds returned 2.08%, contributing 0.17% to relative performance. While several sectors provided standout returns, we are very pleased by the balance of positive relative performance across the portfolio. We work very hard to protect against downside risk and are heartened with the stability that the portfolio provided during a volatile period.
Overall, we are encouraged by the Fund’s ability to provide impactful positive absolute performance during a period when broad intermediate-term municipal bonds produced flat-to-negative total returns. Finding the right balances of risk and reward at this point in the cycle requires a disciplined process, an open mind and discerning analysis. We believe that we can maintain an attractive yield while avoiding poor risk/reward tradeoffs, and can continue to deliver solid performance in a wide variety of economic scenarios.
Sincerely,
Stephen M. Shutz, CFA
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund is non-diversified which means it may invest a large percentage of its assets in the securities of fewer issuers. Investment in a limited number of issuers exposes the Fund to greater market risk than if its assets were diversified among a greater number of issuers. The Fund is also subject to interest rate risk which is the risk that debt securities in the Fund’s portfolio will decline in value because of an increase in market interest rates. Municipal securities are subject to adverse political or economic factors, including changes in the tax law. Income from tax-exempt funds may be subject to state and local taxes and a portion of income may be subject to the federal alternative minimum tax for certain investors.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report. 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.
51
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | |||||||||
Municipal Bonds — 98.2% | |||||||||||||
General Obligation Bonds — 28.9% | |||||||||||||
2,225,000 | Anne Arundel County Maryland | 5.00 | % | 04/01/2022 | 2,524,396 | ||||||||
1,265,000 | Anne Arundel County Maryland | 5.00 | % | 10/01/2026 | 1,549,195 | ||||||||
3,000,000 | Baltimore County Maryland | 4.50 | % | 09/01/2020 | 3,224,100 | ||||||||
1,625,000 | Baltimore, Maryland | 4.00 | % | 10/15/2018 | 1,656,883 | ||||||||
695,000 | Baltimore, Maryland | 5.00 | % | 10/15/2019 | 735,984 | ||||||||
1,305,000 | Baltimore, Maryland | 5.00 | % | 10/15/2018 | 1,340,718 | ||||||||
775,000 | Cecil County Maryland | 4.00 | % | 02/01/2018 | 776,589 | ||||||||
1,360,000 | Cecil County Maryland | 4.00 | % | 12/01/2021 | 1,478,401 | ||||||||
1,390,000 | Charles County Maryland | 5.00 | % | 11/01/2019 | 1,475,026 | ||||||||
1,970,000 | Charles County Maryland | 5.00 | % | 11/01/2021 | 2,214,556 | ||||||||
1,145,000 | Easton, Town of Maryland | 4.00 | % | 02/01/2020 | 1,199,731 | ||||||||
1,145,000 | Easton, Town of Maryland | 4.00 | % | 02/01/2021 | 1,225,413 | ||||||||
1,120,000 | Maryland National Capital Park & Planning Commission | 5.00 | % | 01/15/2019 | 1,160,746 | ||||||||
1,085,000 | Maryland National Capital Park & Planning Commission | 5.00 | % | 01/15/2020 | 1,159,409 | ||||||||
1,000,000 | Maryland State | 5.00 | % | 11/01/2019 | 1,061,360 | ||||||||
1,255,000 | Maryland State | 5.00 | % | 06/01/2023 | 1,466,806 | ||||||||
1,945,000 | Maryland State | 5.00 | % | 08/01/2023 | 2,211,796 | ||||||||
3,145,000 | Maryland State | 5.00 | % | 08/01/2023 | 3,689,525 | ||||||||
1,145,000 | Montgomery County Maryland | 5.00 | % | 12/01/2018 | 1,182,064 | ||||||||
5,000,000 | Montgomery County Maryland | 5.00 | % | 11/01/2023 | 5,905,600 | ||||||||
1,000,000 | Prince George’s County Maryland | 5.00 | % | 09/15/2019 | 1,057,990 | ||||||||
3,320,000 | Prince George’s County Maryland | 5.00 | % | 09/15/2026 | 3,706,116 | ||||||||
1,380,000 | Talbot County Maryland | 5.00 | % | 12/15/2018 | 1,426,313 | ||||||||
1,270,000 | Talbot County Maryland | 5.00 | % | 12/15/2019 | 1,352,055 | ||||||||
1,940,000 | Wicomico County Maryland | 4.00 | % | 11/01/2019 | 2,023,148 | ||||||||
1,985,000 | Wicomico County Maryland | 4.00 | % | 11/01/2020 | 2,111,047 | ||||||||
2,040,000 | Wicomico County Maryland | 4.00 | % | 11/01/2021 | 2,214,706 | ||||||||
2,225,000 | Worcester County Maryland | 5.00 | % | 03/01/2023 | 2,573,168 | ||||||||
53,702,841 | |||||||||||||
Revenue Bonds — 69.3% | |||||||||||||
3,480,000 | Austin, Texas | 7.88 | % | 09/01/2026 | 3,820,344 | ||||||||
1,320,000 | Baltimore, Maryland | 5.00 | % | 07/01/2028 | 1,614,083 | ||||||||
1,000,000 | Baltimore, Maryland | 5.00 | % | 07/01/2028 | 1,222,790 | ||||||||
520,000 | Baltimore, Maryland | 5.00 | % | 06/15/2030 | 583,487 | ||||||||
1,250,000 | Baltimore, Maryland | 5.00 | % | 09/01/2031 | 1,469,750 | ||||||||
1,000,000 | Baltimore, Maryland | 5.00 | % | 07/01/2032 | 1,146,760 | ||||||||
1,365,000 | Baltimore, Maryland | 5.00 | % | 09/01/2032 | 1,591,194 | ||||||||
670,000 | Baltimore, Maryland | 5.00 | % | 06/15/2033 | 743,894 | ||||||||
1,150,000 | Baltimore, Maryland | 5.00 | % | 09/01/2033 | 1,330,124 | ||||||||
1,250,000 | Baltimore, Maryland | 5.00 | % | 09/01/2034 | 1,434,550 | ||||||||
1,000,000 | Denver County Colorado | 5.00 | % | 10/01/2032 | 1,094,820 | ||||||||
1,550,000 | Franklin County Ohio | 5.00 | % | 11/15/2034 | 1,681,889 | ||||||||
2,320,000 | Frederick County Maryland | 5.50 | % | 07/01/2040 | 2,463,562 | ||||||||
1,000,000 | Frederick, Maryland^ | 5.00 | % | 09/01/2032 | 1,103,890 | ||||||||
1,110,000 | Frederick, Maryland^ | 5.00 | % | 09/01/2037 | 1,212,120 | ||||||||
1,000,000 | Harris County Cultural Education Facilities Finance Corp. | 5.00 | % | 01/01/2037 | 1,041,910 | ||||||||
2,000,000 | Lancaster County Pennsylvania Hospital Authority | 5.00 | % | 07/01/2035 | 2,166,100 | ||||||||
1,000,000 | Maryland Community Development Administration | 3.25 | % | 03/01/2036 | 1,029,670 | ||||||||
1,025,000 | Maryland Economic Development Corp.# | 2.55 | % | 12/01/2025 | 1,029,530 | ||||||||
700,000 | Maryland Economic Development Corp. | 5.00 | % | 06/01/2027 | 760,676 | ||||||||
400,000 | Maryland Economic Development Corp. | 5.00 | % | 07/01/2027 | 444,600 | ||||||||
850,000 | Maryland Economic Development Corp. | 5.00 | % | 07/01/2031 | 951,838 | ||||||||
2,300,000 | Maryland Economic Development Corp. | 5.75 | % | 06/01/2035 | 2,517,948 | ||||||||
2,500,000 | Maryland Economic Development Corp.# | 1.80 | % | 02/15/2043 | 2,500,000 |
The accompanying notes are an integral part of these financial statements.
52
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Municipal Bonds — 98.2% (Continued) | ||||||||||||
Revenue Bonds — 69.3% (Continued) | ||||||||||||
4,500,000 | Maryland Economic Development Corp. | 4.50 | % | 07/01/2044 | 4,654,800 | |||||||
1,015,000 | Maryland Health & Higher Educational Facilities Authority | 4.00 | % | 07/01/2019 | 1,050,221 | |||||||
900,000 | Maryland Health & Higher Educational Facilities Authority | 5.00 | % | 07/01/2025 | 1,019,646 | |||||||
1,000,000 | Maryland State Department of Transportation | 5.00 | % | 12/15/2020 | 1,097,580 | |||||||
1,055,000 | Maryland State Department of Transportation | 4.00 | % | 05/15/2022 | 1,155,288 | |||||||
2,400,000 | Maryland State Department of Transportation | 4.00 | % | 05/15/2024 | 2,481,504 | |||||||
260,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2018 | 264,415 | |||||||
485,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2023 | 538,418 | |||||||
515,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2023 | 571,125 | |||||||
500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 08/15/2023 | 578,730 | |||||||
465,000 | Maryland State Health & Higher Educational Facilities | 5.50 | % | 07/01/2024 | 474,314 | |||||||
500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2024 | 554,850 | |||||||
1,500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2025 | 1,763,805 | |||||||
1,250,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2025 | 1,466,138 | |||||||
1,000,000 | Maryland State Health & Higher Educational Facilities | 6.00 | % | 07/01/2025 | 1,124,630 | |||||||
2,500,000 | Maryland State Health & Higher Educational Facilities | 5.25 | % | 07/01/2026 | 2,901,650 | |||||||
420,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2026 | 500,821 | |||||||
1,605,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2028 | 1,859,746 | |||||||
3,500,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2029 | 4,183,165 | |||||||
100,000 | Maryland State Health & Higher Educational Facilities | 4.00 | % | 10/01/2030 | 108,156 | |||||||
1,130,000 | Maryland State Health & Higher Educational Facilities | 6.25 | % | 07/01/2031 | 1,270,549 | |||||||
300,000 | Maryland State Health & Higher Educational Facilities | 4.00 | % | 10/01/2031 | 323,697 | |||||||
1,070,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2032 | 1,217,061 | |||||||
250,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 06/01/2033 | 285,950 | |||||||
1,250,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 08/15/2033 | 1,431,500 | |||||||
15,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2034 | 15,596 | |||||||
235,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 07/01/2034 | 246,717 | |||||||
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 | 490,699 | |||||||
3,400,000 | Maryland State Health & Higher Educational Facilities | 5.00 | % | 05/15/2040 | 3,657,482 | |||||||
4,255,000 | Maryland State Transportation Authority | 5.00 | % | 03/01/2022 | 4,747,686 | |||||||
1,000,000 | Maryland State Transportation Authority | 5.00 | % | 06/01/2022 | 1,120,650 | |||||||
4,420,000 | Maryland State Transportation Authority | 5.00 | % | 07/01/2028 | 5,505,243 | |||||||
9,000,000 | Maryland State Transportation Authority | 5.00 | % | 07/01/2036 | 9,152,820 | |||||||
2,525,000 | Maryland Water Quality Financing Administration | 5.00 | % | 03/01/2020 | 2,702,684 | |||||||
5,000,000 | Massachusetts Port Authority# | 2.54 | % | 01/01/2031 | 4,738,650 | |||||||
1,185,000 | New Hope Texas Cultural Education Facilities Finance Corp. | 5.75 | % | 07/01/2051 | 1,289,481 | |||||||
4,000,000 | New York State Energy Research & Development Authority# | 3.92 | % | 07/01/2029 | 4,000,000 | |||||||
4,000,000 | New York Transportation Development Corp. | 5.00 | % | 08/01/2026 | 4,304,600 | |||||||
2,000,000 | Newport News Virginia Economic Development Authority | 5.00 | % | 12/01/2031 | 2,176,840 | |||||||
2,000,000 | North Carolina Medical Care Commission | 5.00 | % | 10/01/2031 | 2,212,940 | |||||||
1,005,000 | Prince William County Virginia Industrial Development Authority | 5.00 | % | 01/01/2023 | 1,119,279 | |||||||
4,000,000 | University System of Maryland | 5.00 | % | 04/01/2018 | 4,035,920 | |||||||
1,000,000 | University System of Maryland | 5.00 | % | 04/01/2018 | 1,008,980 | |||||||
4,335,000 | University System of Maryland | 5.00 | % | 04/01/2022 | 4,914,503 | |||||||
3,280,000 | Washington State Housing Finance Commission^ | 4.00 | % | 01/01/2026 | 3,435,538 | |||||||
128,909,774 | ||||||||||||
Total Municipal Bonds (Cost $181,629,499) | 182,612,615 |
The accompanying notes are an integral part of these financial statements.
53
Brown Advisory Maryland Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Short-Term Investments — 0.5% | ||||||||
Money Market Funds — 0.5% | ||||||||
850,043 | First American Treasury Obligations Fund, 1.18%* | 850,043 | ||||||
Total Short-Term Investments (Cost $850,043) | 850,043 | |||||||
Total Investments — 98.7% (Cost $182,479,542) | 183,462,658 | |||||||
Other Assets in Excess of Liabilities — 1.3% | 2,367,566 | |||||||
NET ASSETS — 100.0% | $ | 185,830,224 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Revenue Bonds | 69.3 | % | ||
General Obligation Bonds | 28.9 | % | ||
Money Market Funds | 0.5 | % | ||
Other Assets and Liabilities | 1.3 | % | ||
100.0 | % |
# | Variable rate security. Rate disclosed is as of December 31, 2017. | |
^ | 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, 2017, the value of these securities amounted to $5,751,548 or 3.1% of net assets. | |
* | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
54
Brown Advisory Tax Exempt Bond Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory Tax Exempt Bond Fund (the “Fund”) achieved 2.09% in total return. During the same period, the Bloomberg Barclays 1-10 Year Blended Municipal Blend Index, the Fund’s benchmark, increased 0.51%.
The Fund posted attractive relative performance for the six months ended December 31, 2017—a period where broad intermediate municipal bonds produced flat and, in some cases, negative total returns. The Fund benefitted from a combination of our bottom-up credit and sector selection, as well as the eventual increase in short-term municipal yields.
Following a tumultuous end to 2016, the municipal market began to find its footing in early 2017. However, continued policy uncertainty seemed to hang like a cloud over the market. As the year progressed, many investors sought refuge in the perceived safety of short-maturity bonds in an attempt to dampen volatility amidst the specter of U.S. federal tax reform and an active Fed tightening cycle. This flight-to-quality bid in short-maturity municipal securities temporarily suppressed yields on those bonds to levels that we viewed as unsustainable given investable alternatives. As a consequence, we actively avoided the poor risk/reward profile in two-to-five year fixed rate bonds in favor of a large overweight in floating-rate securities and ultra-short callable bond structures.
These defensive positions greatly benefitted the Fund during the fourth quarter as short- and intermediate-term municipal yields began to normalize to higher levels. It seemed that after suffering much consternation around tax reform for much of the year, the tax exemptions most essential to the municipal bond market ended up basically unscathed in the final bill. To be clear, we do not attempt to predict political policy outcomes or specific interest rate movements. Instead, we took notice of the high valuations (on a risk-adjusted basis) of short-term fixed rate bonds and sought other municipal structures that we believed offered a better risk/reward balance while remaining appropriate for the mandate.
Turning to credit, we again saw strong relative performance in many of our credit-sensitive revenue-backed sectors. Generic BBB-and-lower rated revenue-backed municipals sharply outperformed bonds with higher ratings for the period; but, our specific selection effect provided meaningful relative outperformance compared to the broad market. Our health care holdings, for example, returned 3.72% for the period, contributing roughly 0.42% to the Fund’s relative outperformance. Not-for-profit hospitals and airport revenue bonds both returned 2.91%, contributing 0.25% each to relative performance. While several of these sectors provided standout returns, we are very pleased by the balance of positive relative performance across the portfolio. We work very hard to protect against downside risk and are heartened with the stability that the portfolio provided during a volatile period.
Overall, we are encouraged by the Fund’s ability to provide impactful positive absolute performance during a period when broad intermediate-term municipal bonds produced flat-to-negative total returns. Finding the right balance of risk and reward at this point in the cycle requires a disciplined process, an open mind and discerning analysis. We believe we can maintain an attractive yield while avoiding poor risk/reward tradeoffs, and can continue to deliver solid performance in a wide variety of economic scenarios.
Sincerely,
Stephen M. Shutz, CFA
Portfolio Manager
55
Brown Advisory Tax Exempt Bond Fund
A Message to Our Shareholders
December 31, 2017
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.
56
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Municipal Bonds — 96.4% | ||||||||||||
General Obligation Bonds — 9.1% | ||||||||||||
600,000 | Bellwood, Village of Illinois | 3.00 | % | 12/01/2018 | 606,690 | |||||||
1,320,000 | Connecticut, State of | 5.00 | % | 10/15/2022 | 1,483,060 | |||||||
1,025,000 | District of Columbia# | 5.00 | % | 06/01/2029 | 1,228,001 | |||||||
305,000 | Grundy & Will Counties Community Unit School District | 5.88 | % | 08/01/2028 | 312,411 | |||||||
1,020,000 | Honolulu, City & County of Hawaii | 5.00 | % | 10/01/2029 | 1,227,142 | |||||||
2,500,000 | Illinois, State of | 5.00 | % | 04/01/2022 | 2,512,450 | |||||||
3,705,000 | Northside Texas Independent School District# | 1.75 | % | 06/01/2032 | 3,664,949 | |||||||
2,130,000 | Pennsylvania, Commonwealth of | 5.00 | % | 01/15/2028 | 2,561,985 | |||||||
2,205,000 | Pennsylvania, Commonwealth of | 5.00 | % | 02/01/2028 | 2,618,327 | |||||||
1,365,000 | Rosemont, Village of Illinois | 5.00 | % | 12/01/2025 | 1,577,790 | |||||||
6,000,000 | Texas, State of | 5.00 | % | 08/01/2031 | 6,015,480 | |||||||
2,000,000 | Washington Suburban Sanitary Commission# | 1.74 | % | 06/01/2023 | 2,000,000 | |||||||
500,000 | Washington Suburban Sanitary Commission# | 1.74 | % | 06/01/2023 | 500,000 | |||||||
2,000,000 | Washington Suburban Sanitary Commission# | 1.74 | % | 06/01/2023 | 2,000,000 | |||||||
28,308,285 | ||||||||||||
Revenue Bonds — 87.3% | ||||||||||||
550,000 | AltaPointe Health Systems, Inc. | 3.00 | % | 05/01/2019 | 550,126 | |||||||
565,000 | AltaPointe Health Systems, Inc. | 3.00 | % | 05/01/2020 | 568,243 | |||||||
1,285,000 | Arizona Sports & Tourism Authority | 5.00 | % | 07/01/2028 | 1,408,733 | |||||||
1,125,000 | Arlington Texas Higher Education Finance Corp. | 5.00 | % | 02/15/2025 | 1,336,320 | |||||||
4,500,000 | Austin, Texas | 7.88 | % | 09/01/2026 | 4,940,100 | |||||||
2,970,000 | Central Texas Turnpike System | 5.00 | % | 08/15/2027 | 3,465,455 | |||||||
2,615,000 | Chattanooga Tennessee Health Educational & Housing Facility Board | 5.25 | % | 01/01/2040 | 2,859,372 | |||||||
3,000,000 | Chicago Illinois Midway International Airport | 5.00 | % | 01/01/2028 | 3,463,860 | |||||||
1,000,000 | Chicago O’Hare International Airport | 5.00 | % | 01/01/2029 | 1,121,980 | |||||||
300,000 | Colorado Health Facilities Authority Series C | 5.00 | % | 12/01/2020 | 326,211 | |||||||
1,000,000 | Colorado Health Facilities Authority | 5.00 | % | 06/01/2027 | 1,147,020 | |||||||
1,300,000 | Colorado Health Facilities Authority Series A | 5.00 | % | 12/01/2027 | 1,425,346 | |||||||
1,300,000 | Colorado Health Facilities Authority | 5.25 | % | 02/01/2031 | 1,394,861 | |||||||
1,500,000 | Colorado Health Facilities Authority | 5.00 | % | 12/01/2035 | 1,659,120 | |||||||
2,000,000 | Connecticut Special Tax Revenue | 5.00 | % | 01/01/2028 | 2,224,460 | |||||||
1,000,000 | Connecticut Special Tax Revenue | 5.00 | % | 10/01/2029 | 1,122,150 | |||||||
6,135,000 | County of Miami-Dade Florida Water & Sewer System Revenue | 4.00 | % | 10/01/2035 | 6,649,849 | |||||||
4,390,000 | Cumberland County Pennsylvania Municipal Authority | 4.00 | % | 01/01/2033 | 4,503,174 | |||||||
1,100,000 | Denver Colorado Convention Center Hotel Authority | 5.00 | % | 12/01/2028 | 1,299,166 | |||||||
3,000,000 | Denver, City & County of Colorado | 5.00 | % | 10/01/2032 | 3,284,460 | |||||||
5,000,000 | Detroit Michigan Sewage Disposal System (3 Month LIBOR USD + 0.60%) | 1.50 | % | 07/01/2032 | 4,686,950 | |||||||
2,425,000 | District of Columbia# | 3.92 | % | 08/01/2038 | 2,256,099 | |||||||
1,700,000 | Educational Enhancement Funding Corp. South Dakota | 5.00 | % | 06/01/2023 | 1,916,563 | |||||||
1,000,000 | Fairfax County Economic Development Authority | 5.00 | % | 10/01/2029 | 1,241,370 | |||||||
500,000 | Florida Municipal Power Agency | 5.25 | % | 10/01/2023 | 514,195 | |||||||
3,355,000 | Florida Municipal Power Agency | 5.00 | % | 10/01/2025 | 3,771,087 | |||||||
1,000,000 | Hamilton County Convention Facilities Authority | 5.00 | % | 12/01/2033 | 1,123,120 | |||||||
1,000,000 | Harris County Texas Cultural Education Facilities Finance Corp. | 5.00 | % | 12/01/2035 | 1,116,310 | |||||||
1,000,000 | Harris County-Houston Texas Sports Authority | 5.00 | % | 11/15/2028 | 1,162,980 | |||||||
200,000 | Henrico County Economic Development Authority# | 2.64 | % | 08/23/2027 | 187,014 | |||||||
5,000,000 | Houston Texas Airport System | 5.00 | % | 07/01/2026 | 5,012,450 | |||||||
3,850,000 | Houston Texas Airport System | 5.00 | % | 07/01/2029 | 4,270,150 | |||||||
4,000,000 | Illinois Finance Authority B# | 1.60 | % | 08/01/2044 | 4,000,000 | |||||||
1,000,000 | Indiana Finance Authority | 5.00 | % | 09/15/2025 | 1,129,600 | |||||||
1,750,000 | Indiana Finance Authority Series A | 5.00 | % | 09/15/2028 | 1,960,927 | |||||||
1,250,000 | Kentucky Economic Development Finance Authority | 5.00 | % | 05/01/2024 | 1,296,012 | |||||||
1,640,000 | Kentucky State Property & Building Commission | 5.00 | % | 02/01/2021 | 1,787,157 | |||||||
3,000,000 | Lancaster County Pennsylvania Hospital Authority | 5.00 | % | 07/01/2035 | 3,249,150 |
The accompanying notes are an integral part of these financial statements.
57
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Municipal Bonds — 96.4% (Continued) | ||||||||||||
Revenue Bonds — 87.3% (Continued) | ||||||||||||
2,280,000 | Las Vegas Nevada Redevelopment Agency | 5.00 | % | 06/15/2028 | 2,671,932 | |||||||
4,750,000 | Lees Summit Missouri Industrial Development Authority | 5.13 | % | 08/15/2032 | 4,755,700 | |||||||
1,000,000 | Long Island Power Authority | 5.00 | % | 09/01/2030 | 1,209,540 | |||||||
2,000,000 | Louisiana Public Facilities Authority | 3.50 | % | 06/01/2030 | 2,038,680 | |||||||
1,000,000 | Louisiana Public Facilities Authority | 5.00 | % | 06/01/2036 | 1,123,510 | |||||||
1,500,000 | Louisiana State Citizens Property Insurance Corp. | 5.00 | % | 06/01/2020 | 1,609,785 | |||||||
985,000 | Lower Colorado River Texas Authority | 5.50 | % | 05/15/2036 | 1,033,413 | |||||||
5,030,000 | Maryland Health & Higher Educational Facilities Authority | 5.50 | % | 01/01/2036 | 5,945,259 | |||||||
150,000 | Massachusetts Health & Educational Facilities Authority | 5.00 | % | 10/01/2024 | 150,408 | |||||||
1,015,000 | Massachusetts Health & Educational Facilities Authority | 5.50 | % | 06/01/2034 | 1,032,113 | |||||||
6,000,000 | Massachusetts Port Authority# | 2.54 | % | 01/01/2031 | 5,686,380 | |||||||
1,895,000 | Miami Beach Florida Health Facilities | 5.00 | % | 11/15/2029 | 2,077,053 | |||||||
1,165,000 | Mississippi Development Bank | 5.50 | % | 10/01/2021 | 1,275,162 | |||||||
1,620,000 | Mississippi Development Bank | 6.25 | % | 10/01/2026 | 1,777,950 | |||||||
1,605,000 | Mississippi Development Bank | 6.50 | % | 10/01/2031 | 1,754,217 | |||||||
1,375,000 | Missouri Health & Educational Facilities Authority# | 2.02 | % | 06/01/2031 | 1,289,956 | |||||||
1,000,000 | Mobile Alabama Industrial Development Board# | 1.63 | % | 07/15/2034 | 996,190 | |||||||
1,500,000 | Montgomery County Pennsylvania Industrial Development Authority# | 2.55 | % | 06/01/2029 | 1,506,630 | |||||||
1,600,000 | Mountain House California Public Financing Authority | 5.00 | % | 12/01/2027 | 1,604,032 | |||||||
2,565,000 | Mountain House California Public Financing Authority | 5.00 | % | 12/01/2032 | 2,570,669 | |||||||
1,045,000 | New Hampshire State Turnpike System | 5.00 | % | 04/01/2021 | 1,117,011 | |||||||
1,000,000 | New Hope Texas Cultural Education Facilities Corp. | 5.00 | % | 04/01/2029 | 1,110,070 | |||||||
1,080,000 | New Hope Texas Cultural Education Facilities Corp. | 5.00 | % | 07/01/2031 | 1,157,933 | |||||||
1,400,000 | New Hope Texas Cultural Education Facilities Corp. | 5.25 | % | 07/01/2036 | 1,505,140 | |||||||
2,400,000 | New Hope Texas Cultural Education Facilities Corp. | 5.00 | % | 08/01/2039 | 2,504,424 | |||||||
1,250,000 | New Hope Texas Cultural Education Facilities Corp. | 5.50 | % | 07/01/2046 | 1,342,913 | |||||||
1,000,000 | New Hope Texas Cultural Education Facilities Finance Corp. | 5.75 | % | 07/01/2051 | 1,088,170 | |||||||
3,955,000 | New Jersey Educational Facilities Authority | 5.00 | % | 07/01/2023 | 4,558,335 | |||||||
4,510,000 | New York City Industrial Development Agency# | 2.47 | % | 10/01/2029 | 4,398,017 | |||||||
2,375,000 | New York City Industrial Development Agency | 5.00 | % | 01/01/2039 | 2,407,918 | |||||||
3,000,000 | New York City Industrial Development Agency | 5.00 | % | 01/01/2046 | 3,036,000 | |||||||
1,000,000 | New York City Transitional Finance Authority Future Tax Secured Revenue | 5.00 | % | 08/01/2033 | 1,190,590 | |||||||
500,000 | New York State Energy Research & Development Authority# | 0.74 | % | 12/01/2025 | 500,000 | |||||||
430,000 | New York State Energy Research & Development Authority# | 3.91 | % | 12/01/2025 | 430,000 | |||||||
150,000 | New York State Energy Research & Development Authority# | 0.69 | % | 12/01/2026 | 150,000 | |||||||
9,000,000 | New York State Energy Research & Development Authority# | 3.92 | % | 07/01/2029 | 9,000,000 | |||||||
2,250,000 | New York State Energy Research & Development Authority# | 1.94 | % | 05/01/2034 | 2,162,093 | |||||||
5,950,000 | New York State Energy Research & Development Authority# | 1.88 | % | 05/01/2034 | 5,717,474 | |||||||
550,000 | New York State Energy Research & Development Authority# | 1.94 | % | 10/01/2036 | 528,759 | |||||||
500,000 | New York State Energy Research & Development Authority# | 1.70 | % | 10/01/2036 | 480,690 | |||||||
3,500,000 | New York Transportation Development Corp. | 5.00 | % | 08/01/2020 | 3,729,705 | |||||||
4,000,000 | New York Transportation Development Corp. | 5.00 | % | 08/01/2026 | 4,304,600 | |||||||
3,375,000 | Newport News Virginia Economic Development Authority | 5.00 | % | 12/01/2031 | 3,673,418 | |||||||
1,760,000 | Niagara County New York Tobacco Asset Securitization Corp. | 5.00 | % | 05/15/2024 | 2,069,514 | |||||||
2,000,000 | North Carolina Medical Care Commission | 5.00 | % | 10/01/2031 | 2,212,940 | |||||||
1,000,000 | North Texas Tollway Authority | 5.00 | % | 01/01/2026 | 1,148,590 | |||||||
1,000,000 | North Texas Tollway Authority | 5.00 | % | 01/01/2030 | 1,184,910 | |||||||
1,000,000 | North Texas Tollway Authority | 5.00 | % | 01/01/2038 | 1,131,240 | |||||||
5,400,000 | Ohio Air Quality Development Authority^ | 3.75 | % | 01/15/2028 | 5,620,158 | |||||||
3,790,000 | Oregon State Facilities Authority | 5.00 | % | 10/01/2031 | 4,403,866 | |||||||
1,250,000 | Palm Beach County Florida Health Facilities Authority | 5.00 | % | 12/01/2031 | 1,401,650 | |||||||
1,000,000 | Park Creek Metropolitan District | 5.00 | % | 12/01/2022 | 1,135,640 | |||||||
1,000,000 | Park Creek Metropolitan District | 5.00 | % | 12/01/2034 | 1,155,890 | |||||||
1,535,000 | Pennsylvania Economic Development Financing Authority | 5.00 | % | 11/01/2027 | 1,702,545 | |||||||
1,900,000 | Pennsylvania Turnpike Commission | 5.00 | % | 12/01/2030 | 2,073,356 |
The accompanying notes are an integral part of these financial statements.
58
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par | ||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | ||||||||
Municipal Bonds — 96.4% (Continued) | ||||||||||||
Revenue Bonds — 87.3% (Continued) | ||||||||||||
1,000,000 | Pennsylvania Turnpike Commission | 5.00 | % | 12/01/2034 | 1,175,980 | |||||||
1,000,000 | Port of Seattle Washington | 5.00 | % | 02/01/2030 | 1,192,300 | |||||||
1,110,000 | Prince William County Virginia Industrial Development Authority | 5.00 | % | 01/01/2025 | 1,252,113 | |||||||
1,420,000 | Prince William County Virginia Industrial Development Authority | 5.00 | % | 01/01/2031 | 1,565,010 | |||||||
1,500,000 | Public Finance Authority | 2.63 | % | 11/01/2025 | 1,526,085 | |||||||
1,500,000 | Public Finance Authority^ | 5.00 | % | 09/01/2030 | 1,590,480 | |||||||
1,400,000 | Springfield, City of Illinois Electric Revenue | 5.00 | % | 03/01/2026 | 1,638,140 | |||||||
1,000,000 | St. Louis County Missouri Industrial Development Authority | 5.00 | % | 11/15/2041 | 1,028,760 | |||||||
1,000,000 | St. Louis Missouri Parking Revenue | 5.00 | % | 12/15/2021 | 1,108,160 | |||||||
2,095,000 | State of Connecticut Special Tax Revenue | 5.00 | % | 08/01/2031 | 2,395,381 | |||||||
960,000 | Tarrant County Texas Cultural Education Facilities Finance Corp. | 2.50 | % | 12/01/2018 | 960,797 | |||||||
1,125,000 | Tarrant County Texas Cultural Education Facilities Finance Corp. | 5.00 | % | 11/15/2021 | 1,256,186 | |||||||
1,185,000 | Tarrant County Texas Cultural Education Facilities Finance Corp. | 5.00 | % | 11/15/2022 | 1,346,101 | |||||||
1,115,000 | Tobacco Settlement Authority | 5.25 | % | 06/01/2032 | 1,210,444 | |||||||
3,735,000 | Tobacco Settlement Financing Corp. | 5.00 | % | 05/15/2019 | 3,904,868 | |||||||
1,155,000 | Troy Capital Resource Corp. | 5.00 | % | 09/01/2030 | 1,236,566 | |||||||
2,790,000 | TSASC, Inc. | 5.00 | % | 06/01/2022 | 3,132,891 | |||||||
1,000,000 | Tulare California Public Financing Authority | 5.38 | % | 04/01/2035 | 1,009,490 | |||||||
5,000,000 | University of Houston Texas | 5.00 | % | 02/15/2027 | 6,060,150 | |||||||
2,600,000 | University of Houston Texas | 5.00 | % | 02/15/2028 | 3,134,092 | |||||||
4,000,000 | Virginia Small Business Financing Authority | 5.00 | % | 07/01/2034 | 4,333,520 | |||||||
2,000,000 | Waco Texas Educational Finance Corp. | 5.00 | % | 03/01/2028 | 2,011,600 | |||||||
5,000,000 | Washington D.C. Convention & Sports Authority | 5.00 | % | 10/01/2025 | 5,014,750 | |||||||
1,000,000 | Washington State Housing Finance Commission^ | 4.00 | % | 01/01/2026 | 1,047,420 | |||||||
2,655,000 | Washington State Housing Finance Commission^ | 5.00 | % | 01/01/2031 | 2,903,641 | |||||||
1,505,000 | Washoe, County of Nevada | 5.00 | % | 02/01/2043 | 1,551,730 | |||||||
970,000 | Wayne County Michigan Airport Authority | 5.75 | % | 12/01/2024 | 1,006,249 | |||||||
1,610,000 | Wisconsin Health & Educational Facilities Authority | 5.00 | % | 05/01/2027 | 1,793,282 | |||||||
1,730,000 | Wisconsin Health & Educational Facilities Authority | 5.00 | % | 08/15/2028 | 1,932,202 | |||||||
650,000 | Wisconsin Health & Educational Facilities Authority | 5.00 | % | 09/15/2037 | 694,207 | |||||||
200,000 | Wisconsin, State of | 5.75 | % | 05/01/2033 | 211,046 | |||||||
910,000 | Yamhill County Oregon Hospital Authority | 4.00 | % | 11/15/2026 | 948,830 | |||||||
480,000 | Yamhill County Oregon Hospital Authority | 5.00 | % | 11/15/2031 | 525,590 | |||||||
460,000 | Yamhill County Oregon Hospital Authority | 5.00 | % | 11/15/2036 | 497,550 | |||||||
1,085,000 | Yamhill County Oregon Hospital Authority | 5.00 | % | 11/15/2046 | 1,157,760 | |||||||
272,226,649 | ||||||||||||
Total Municipal Bonds (Cost $299,285,607) | 300,534,934 | |||||||||||
Short-Term Investments — 2.0% | ||||||||||||
Money Market Funds — 2.0% | ||||||||||||
6,271,314 | First American Treasury Obligations Fund — Class Z, 1.18%* | 6,271,314 | ||||||||||
Total Short-Term Investments (Cost $6,271,314) | 6,271,314 | |||||||||||
Total Investments — 98.4% (Cost $305,556,921) | 306,806,248 | |||||||||||
Other Assets in Excess of Liabilities — 1.6% | 4,992,890 | |||||||||||
NET ASSETS — 100.0% | $ | 311,799,138 |
The accompanying notes are an integral part of these financial statements.
59
Brown Advisory Tax Exempt Bond Fund
Schedule of Investments
December 31, 2017 (Unaudited)
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Revenue Bonds | 87.3 | % | ||
General Obligation Bonds | 9.1 | % | ||
Money Market Funds | 2.0 | % | ||
Other Assets and Liabilities | 1.6 | % | ||
100.0 | % |
# | Variable rate security. Rate disclosed is as of December 31, 2017. | |
* | Annualized seven-day yield as of December 31, 2017. | |
^ | 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, 2017, the value of these securities amounted to $11,161,699 or 3.6% of net assets. |
The accompanying notes are an integral part of these financial statements.
60
Brown Advisory Mortgage Securities Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ending December 31, 2017, the Brown Advisory Mortgage Securities Fund Institutional Shares (the “Fund”) were up 0.91%. This was somewhat behind its benchmark, the Bloomberg Barclays Mortgage Backed Securities Index, which returned 1.11%.
The Fund’s investment process in Agency-backed mortgages is focused on finding mortgage-related bonds that we believe will enjoy superior principal payment speeds. If borrowers refinance their mortgages at a slower pace, that results in investors receiving more income which, ultimately, will turn into greater total return.
Finding mortgage pools that will pay more slowly involves looking for loans where the borrower has a reduced incentive to refinance. This includes loans with smaller loan balances, lower equity, recent purchases, etc. Though our positions earned more income than those in the benchmark during this period, the mix of coupons we held somewhat offset the superior income generation. Lower-coupon bonds outperformed middle- and higher-coupon bonds; we are more overweight the latter. As a result, our Agency mortgage positions performed roughly in line with the benchmark.
In recent months, we have reduced positions in Agency mortgages in favor of other types of high-quality securitized bonds. Spreads on Agency mortgage-backed securities (“MBS”) have become very tight, and we think that any increase in either interest rate volatility or spreads generally could cause MBS spreads to widen. We have done this without increasing exposure to general credit spreads. We have mostly bought other types of government-guaranteed bonds and/or AAA-rated securities.
We believe strongly in the advantages that sticking to our core process–analyzing each loan and assessing the borrower’s incentives–can bring over time.
Sincerely,
Thomas D.D. Graff, CFA
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in Asset-Backed and Mortgage-Backed securities include additional risks that investor should be aware of including credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. Certain fixed income securities held by the Fund may be difficult (or impossible) to sell at the time and at the price the Adviser would like. As a result, the Fund may have to hold these securities longer than it would like and may forego other investment opportunities. Issuers may experience an acceleration in prepayments of mortgage loans or other receivables backing the issuers’ fixed income securities when interest rates decline, which can shorten the maturity of the security, force the Fund to invest in securities with lower interest rates, and reduce the Fund’s return. Issuers may decrease prepayments of principal when interest rates increase, extending the maturity of a fixed income security and causing the value of the security to decline. Investing involves risk. Principal loss is possible. Investors should consult a tax professional for advice and information concerning the tax features of mortgage backed securities and fixed coupon bonds. Mortgage-backed securities (MBS) are bonds secured by a mortgage or collection of mortgages. Diversification does not assure a profit nor protect against loss in a declining market.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
61
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% | ||||||||||||
1,900,000 | BAMLL Commercial Mortgage Securities Trust, Series 2013-DSNY A | |||||||||||
(1 Month LIBOR USD + 1.05%)^ | 2.53 | % | 09/15/2026 | 1,904,612 | ||||||||
1,600,000 | BAMLL Commercial Mortgage Securities Trust, Series 2017-BNK3 AS | 3.75 | % | 02/17/2050 | 1,647,327 | |||||||
1,400,000 | BANK, Series 2017-BNK4 AS | 3.78 | % | 05/17/2050 | 1,434,883 | |||||||
420,511 | Bayview Opportunity Master Fund IIIb Trust, Series 2017-CRT2 M | |||||||||||
(1 Month LIBOR USD + 2.00%)^ | 3.56 | % | 11/29/2027 | 421,562 | ||||||||
1,447,821 | Bayview Opportunity Master Fund IVb Trust, Series 2017-CRT1 M | |||||||||||
(1 Month LIBOR USD + 2.15%)^ | 3.71 | % | 10/25/2028 | 1,453,635 | ||||||||
1,000,000 | Chicago Skyscraper Trust, Series 2017-SKY A (1 Month LIBOR USD + 0.80%)^ | 2.28 | % | 02/15/2030 | 1,002,574 | |||||||
28,353 | FHLMC PC, Pool# E9-9078 | 4.50 | % | 09/01/2018 | 28,767 | |||||||
17,691 | FHLMC PC, Pool# E9-9081 | 4.50 | % | 09/01/2018 | 17,950 | |||||||
27,672 | FHLMC PC, Pool# E9-9067 | 4.50 | % | 09/01/2018 | 28,077 | |||||||
32,547 | FHLMC PC, Pool# E0-1446 | 4.50 | % | 09/01/2018 | 33,022 | |||||||
91,559 | FHLMC PC, Pool# B1-0554 | 4.50 | % | 11/01/2018 | 92,897 | |||||||
58,222 | FHLMC PC, Pool# B1-2124 | 4.50 | % | 02/01/2019 | 59,073 | |||||||
57,061 | FHLMC PC, Pool# B1-2048 | 4.50 | % | 02/01/2019 | 57,894 | |||||||
22,135 | FHLMC PC, Pool# B1-2315 | 5.00 | % | 02/01/2019 | 22,584 | |||||||
54,326 | FHLMC PC, Pool# B1-2954 | 4.50 | % | 03/01/2019 | 55,120 | |||||||
23,678 | FHLMC PC, Pool# B1-5004 | 5.00 | % | 06/01/2019 | 24,158 | |||||||
24,409 | FHLMC PC, Pool# B1-7160 | 5.00 | % | 11/01/2019 | 24,903 | |||||||
131,348 | FHLMC PC, Pool# J1-1925 | 4.00 | % | 04/01/2020 | 135,253 | |||||||
26,469 | FHLMC PC, Pool# G1-3598 | 5.00 | % | 04/01/2020 | 27,003 | |||||||
22,012 | FHLMC PC, Pool# B1-9221 | 5.00 | % | 04/01/2020 | 22,488 | |||||||
109,177 | FHLMC PC, Pool# J1-2792 | 4.00 | % | 08/01/2020 | 112,423 | |||||||
46,337 | FHLMC PC, Pool# M3-0034 | 4.00 | % | 12/01/2020 | 46,882 | |||||||
20,867 | FHLMC PC, Pool# J1-4794 | 4.00 | % | 03/01/2021 | 21,487 | |||||||
26,912 | FHLMC PC, Pool# G1-8105 | 5.00 | % | 03/01/2021 | 27,510 | |||||||
62,282 | FHLMC PC, Pool# G1-1980 | 5.00 | % | 04/01/2021 | 64,241 | |||||||
26,271 | FHLMC PC, Pool# C9-0438 | 6.50 | % | 04/01/2021 | 28,270 | |||||||
263,690 | FHLMC PC, Pool# G1-2335 | 5.00 | % | 05/01/2021 | 271,882 | |||||||
8,376 | FHLMC PC, Pool# G1-3055 | 5.00 | % | 05/01/2021 | 8,558 | |||||||
29,684 | FHLMC PC, Pool# D9-4634 | 6.50 | % | 05/01/2021 | 30,961 | |||||||
83,588 | FHLMC PC, Pool# G1-2205 | 4.50 | % | 06/01/2021 | 85,113 | |||||||
67,182 | FHLMC PC, Pool# C9-0449 | 6.50 | % | 06/01/2021 | 71,886 | |||||||
38,180 | FHLMC PC, Pool# C9-0457 | 6.50 | % | 07/01/2021 | 40,534 | |||||||
22,599 | FHLMC PC, Pool# D9-4802 | 6.00 | % | 08/01/2021 | 25,259 | |||||||
22,584 | FHLMC PC, Pool# C9-0473 | 6.50 | % | 08/01/2021 | 25,024 | |||||||
24,979 | FHLMC PC, Pool# C9-0482 | 6.50 | % | 09/01/2021 | 26,865 | |||||||
123,643 | FHLMC PC, Pool# G1-2364 | 6.50 | % | 09/01/2021 | 130,229 | |||||||
78,742 | FHLMC PC, Pool# G1-2419 | 5.00 | % | 10/01/2021 | 81,779 | |||||||
247,835 | FHLMC PC, Pool# G1-3731 | 5.50 | % | 11/01/2021 | 254,303 | |||||||
54,296 | FHLMC PC, Pool# G1-2521 | 5.00 | % | 12/01/2021 | 55,810 | |||||||
62,769 | FHLMC PC, Pool# G8-0074 | 7.75 | % | 12/17/2021 | 64,576 | |||||||
138,617 | FHLMC PC, Pool# G1-2729 | 6.50 | % | 01/01/2022 | 144,227 | |||||||
12,472 | FHLMC PC, Pool# C9-0523 | 6.00 | % | 02/01/2022 | 13,940 | |||||||
46,731 | FHLMC PC, Pool# G1-2944 | 5.00 | % | 05/01/2022 | 48,616 | |||||||
109,353 | FHLMC PC, Pool# C9-0552 | 6.00 | % | 06/01/2022 | 122,224 | |||||||
116,421 | FHLMC PC, Pool# G1-3627 | 6.00 | % | 08/01/2022 | 120,522 | |||||||
536,409 | FHLMC PC, Pool# G1-3344 | 6.00 | % | 03/01/2023 | 561,479 | |||||||
136,184 | FHLMC PC, Pool# Z6-0016 | 5.50 | % | 04/01/2023 | 148,840 | |||||||
116,298 | FHLMC PC, Pool# G1-3300 | 4.50 | % | 05/01/2023 | 121,900 | |||||||
89,091 | FHLMC PC, Pool# G1-3241 | 5.50 | % | 08/01/2023 | 94,269 | |||||||
272,362 | FHLMC PC, Pool# G1-3245 | 5.50 | % | 08/01/2023 | 287,877 | |||||||
164,213 | FHLMC PC, Pool# G1-3597 | 5.50 | % | 12/01/2023 | 171,895 | |||||||
1,618,458 | FHLMC PC, Pool# G1-3432 | 5.50 | % | 01/01/2024 | 1,701,529 | |||||||
40,797 | FHLMC PC, Pool# J2-7466 | 4.00 | % | 02/01/2024 | 42,132 |
The accompanying notes are an integral part of these financial statements.
62
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% (Continued) | ||||||||||||
339,975 | FHLMC PC, Pool# E0-2621 | 4.50 | % | 05/01/2024 | 357,430 | |||||||
10,284 | FHLMC PC, Pool# G1-3584 | 4.50 | % | 06/01/2024 | 10,781 | |||||||
171,787 | FHLMC PC, Pool# G1-3650 | 4.50 | % | 09/01/2024 | 180,083 | |||||||
23,719 | FHLMC PC, Pool# J1-1196 | 4.50 | % | 11/01/2024 | 24,880 | |||||||
33,309 | FHLMC PC, Pool# G1-3900 | 5.00 | % | 12/01/2024 | 34,032 | |||||||
954,793 | FHLMC PC, Pool# G1-6223 | 5.50 | % | 12/01/2024 | 1,000,429 | |||||||
125,048 | FHLMC PC, Pool# J1-1722 | 4.50 | % | 02/01/2025 | 131,205 | |||||||
107,014 | FHLMC PC, Pool# J1-2041 | 4.50 | % | 04/01/2025 | 112,267 | |||||||
162,377 | FHLMC PC, Pool# E0-2698 | 4.50 | % | 06/01/2025 | 170,400 | |||||||
529,385 | FHLMC PC, Pool# G1-3888 | 5.00 | % | 06/01/2025 | 556,033 | |||||||
41,737 | FHLMC PC, Pool# G1-5035 | 4.50 | % | 07/01/2025 | 43,806 | |||||||
118,700 | FHLMC PC, Pool# G1-4218 | 4.50 | % | 12/01/2025 | 124,602 | |||||||
221,817 | FHLMC PC, Pool# G1-4153 | 5.00 | % | 04/01/2026 | 232,646 | |||||||
204,697 | FHLMC PC, Pool# G1-4204 | 4.50 | % | 06/01/2026 | 214,793 | |||||||
372,720 | FHLMC PC, Pool# G1-4236 | 4.50 | % | 06/01/2026 | 391,528 | |||||||
302,217 | FHLMC PC, Pool# G1-4426 | 5.00 | % | 06/01/2026 | 316,532 | |||||||
46,212 | FHLMC PC, Pool# G1-4375 | 4.00 | % | 07/01/2026 | 47,997 | |||||||
1,434,400 | FHLMC PC, Pool# G1-5019 | 4.50 | % | 07/01/2026 | 1,457,194 | |||||||
107,468 | FHLMC PC, Pool# G1-4295 | 4.50 | % | 09/01/2026 | 112,411 | |||||||
27,612 | FHLMC PC, Pool# G8-0294 | 6.20 | % | 10/20/2027 | 29,366 | |||||||
59,888 | FHLMC PC, Pool# N3-0530 | 5.50 | % | 01/01/2029 | 61,150 | |||||||
1,138,589 | FHLMC PC, Pool# J3-2596 | 3.50 | % | 08/01/2030 | 1,177,579 | |||||||
1,039,869 | FHLMC PC, Pool# J3-2643 | 3.50 | % | 09/01/2030 | 1,076,746 | |||||||
79,343 | FHLMC PC, Pool# N5-0056 | 6.50 | % | 02/01/2031 | 82,627 | |||||||
19,644 | FHLMC PC, Pool# G8-0285 | 9.00 | % | 04/17/2031 | 21,875 | |||||||
70,759 | FHLMC PC, Pool# C6-6421 | 6.50 | % | 02/01/2032 | 78,398 | |||||||
43,830 | FHLMC PC, Pool# P0-0023 | 6.50 | % | 11/01/2032 | 47,196 | |||||||
276,907 | FHLMC PC, Pool# N7-0078 | 5.50 | % | 01/01/2033 | 293,906 | |||||||
141,763 | FHLMC PC, Pool# 1B-0889 (12 Month LIBOR USD + 1.59%) | 3.40 | % | 05/01/2033 | 149,102 | |||||||
88,392 | FHLMC PC, Pool# 1J-0204 (12 Month LIBOR USD + 1.75%) | 3.54 | % | 05/01/2035 | 93,053 | |||||||
259,002 | FHLMC PC, Pool# N7-0071 | 6.00 | % | 06/01/2035 | 278,806 | |||||||
1,703,852 | FHLMC PC, Pool# K9-3365 | 3.50 | % | 11/01/2035 | 1,771,722 | |||||||
1,059,744 | FHLMC PC, Pool# K9-3349 | 4.00 | % | 11/01/2035 | 1,122,443 | |||||||
55,891 | FHLMC PC, Pool# 1L-1263 (1 Year CMT Rate + 2.25%) | 3.12 | % | 03/01/2036 | 59,229 | |||||||
66,418 | FHLMC PC, Pool# 1H-1348 (1 Year CMT Rate + 2.14%) | 3.29 | % | 10/01/2036 | 69,711 | |||||||
114,499 | FHLMC PC, Pool# B3-1891 | 5.38 | % | 01/01/2037 | 124,559 | |||||||
370,070 | FHLMC PC, Pool# 84-7727 (12 Month LIBOR USD + 1.74%) | 3.49 | % | 02/01/2037 | 388,213 | |||||||
216,229 | FHLMC PC, Pool# B3-1900 | 5.38 | % | 02/01/2037 | 235,315 | |||||||
238,769 | FHLMC PC, Pool# B3-1917 | 5.10 | % | 04/01/2037 | 257,317 | |||||||
127,790 | FHLMC PC, Pool# B3-1934 | 5.38 | % | 04/01/2037 | 139,001 | |||||||
33,414 | FHLMC PC, Pool# A5-9109 | 7.50 | % | 04/01/2037 | 37,450 | |||||||
249,138 | FHLMC PC, Pool# B3-1976 | 5.10 | % | 05/01/2037 | 268,546 | |||||||
90,600 | FHLMC PC, Pool# B3-1950 | 5.10 | % | 05/01/2037 | 97,669 | |||||||
188,264 | FHLMC PC, Pool# A6-7884 | 5.38 | % | 05/01/2037 | 204,770 | |||||||
164,975 | FHLMC PC, Pool# 1J-1681 (12 Month LIBOR USD + 1.98%) | 3.86 | % | 06/01/2037 | 174,616 | |||||||
182,884 | FHLMC PC, Pool# B3-2000 | 5.10 | % | 06/01/2037 | 197,028 | |||||||
103,361 | FHLMC PC, Pool# U3-0471 | 5.10 | % | 07/01/2037 | 111,379 | |||||||
103,402 | FHLMC PC, Pool# B3-2032 | 5.10 | % | 07/01/2037 | 111,402 | |||||||
59,485 | FHLMC PC, Pool# U3-0653 | 5.13 | % | 07/01/2037 | 64,580 | |||||||
245,107 | FHLMC PC, Pool# U3-0681 | 5.10 | % | 09/01/2037 | 264,055 | |||||||
81,933 | FHLMC PC, Pool# U3-0606 | 5.10 | % | 09/01/2037 | 88,298 | |||||||
56,055 | FHLMC PC, Pool# 1G-2249 (12 Month LIBOR USD + 1.78%) | 3.53 | % | 10/01/2037 | 58,743 | |||||||
285,234 | FHLMC PC, Pool# T3-0346 | 5.38 | % | 10/01/2037 | 310,329 | |||||||
90,902 | FHLMC PC, Pool# U3-0800 | 5.10 | % | 11/01/2037 | 97,963 | |||||||
155,295 | FHLMC PC, Pool# U3-1874 | 5.38 | % | 04/01/2038 | 169,030 | |||||||
439,434 | FHLMC PC, Pool# N7-0082 | 6.00 | % | 07/01/2038 | 475,513 |
The accompanying notes are an integral part of these financial statements.
63
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% (Continued) | ||||||||||||
122,343 | FHLMC PC, Pool# U3-2470 | 5.10 | % | 11/01/2038 | 131,889 | |||||||
104,210 | FHLMC PC, Pool# A8-9112 | 4.50 | % | 10/01/2039 | 110,808 | |||||||
253,756 | FHLMC PC, Pool# Q0-3759 | 3.50 | % | 10/01/2041 | 261,774 | |||||||
659,412 | FHLMC PC, Pool# Q3-8585 | 4.00 | % | 10/01/2043 | 692,224 | |||||||
644,261 | FHLMC PC, Pool# Q2-6108 | 5.00 | % | 05/01/2044 | 692,682 | |||||||
1,885,594 | FHLMC PC, Pool# Q4-6591 | 4.00 | % | 03/01/2047 | 1,973,231 | |||||||
787,737 | FHLMC PC, Pool# Q4-6965 | 4.50 | % | 03/01/2047 | 839,435 | |||||||
2,764,913 | FHLMC PC, Pool# Q4-6676 | 4.50 | % | 03/01/2047 | 2,940,540 | |||||||
1,812,275 | FHLMC PC, Pool# Q4-7871 | 4.00 | % | 05/01/2047 | 1,896,505 | |||||||
1,057,898 | FHLMC PC, Pool# Q5-2011 | 4.00 | % | 11/01/2047 | 1,107,079 | |||||||
5,749,109 | FHLMC REMIC, Series 4318~ | 2.50 | % | 08/15/2022 | 256,613 | |||||||
20,259 | FHLMC REMIC, Series 2516 | 5.50 | % | 10/15/2022 | 21,351 | |||||||
714,496 | FHLMC REMIC, Series 3925 | 4.00 | % | 11/15/2022 | 715,052 | |||||||
4,849,681 | FHLMC REMIC, Series 4329~ | 2.50 | % | 01/15/2023 | 245,672 | |||||||
88,143 | FHLMC REMIC, Series 3571 | 4.00 | % | 09/15/2024 | 91,078 | |||||||
1,443,234 | FHLMC REMIC, Series 4092~ | 3.00 | % | 09/15/2031 | 159,960 | |||||||
213,811 | FHLMC REMIC, Series 2517 | 5.50 | % | 10/15/2032 | 224,841 | |||||||
277,138 | FHLMC REMIC, Series 3294 | 5.50 | % | 03/15/2037 | 303,775 | |||||||
2,065,787 | FHLMC REMIC, Series 4309~ | 3.00 | % | 08/15/2039 | 256,347 | |||||||
2,109,547 | FHLMC REMIC, Series 4015~ | 4.00 | % | 11/15/2039 | 282,680 | |||||||
242,254 | FHLMC REMIC, Series 3878 | 3.00 | % | 04/15/2041 | 243,819 | |||||||
1,392,103 | FHLMC REMIC, Series 4126~ | 3.50 | % | 05/15/2041 | 176,419 | |||||||
4,611,425 | FHLMC REMIC, Series 4495~ | 3.50 | % | 07/15/2045 | 845,734 | |||||||
76,683 | FHLMC REMIC, Series 1843 | 7.00 | % | 04/15/2026 | 83,808 | |||||||
1,450,000 | FHLMC SCRTT, Series 2016-1 M1#^ | 3.00 | % | 09/25/2055 | 1,410,508 | |||||||
1,069,939 | FHLMC SCRTT, Series 2017-1ʭ | 2.25 | % | 01/25/2056 | 1,066,134 | |||||||
1,919,905 | FHLMC SCRTT, Series 2017-2ʭ | 2.00 | % | 08/25/2056 | 1,908,511 | |||||||
532,184 | FHLMC STACR Debt Notes, Series 2015-DNA1 (1 Month LIBOR USD + 0.90%) | 2.45 | % | 10/25/2027 | 532,789 | |||||||
628,997 | FHLMC WLST, Series 2017-SC02 | 3.50 | % | 05/25/2047 | 636,579 | |||||||
5,245,000 | FHMS, Series K-709 | 2.09 | % | 03/25/2019 | 5,246,940 | |||||||
4,913,060 | FHMS, Series K-712 | 1.87 | % | 11/25/2019 | 4,894,486 | |||||||
500,000 | FHMS, Series K-713 | 2.31 | % | 03/25/2020 | 500,587 | |||||||
240,000 | FHMS, Series K-714# | 3.03 | % | 10/25/2020 | 244,395 | |||||||
3,000,000 | FHMS, Series K-729# | 3.14 | % | 10/25/2024 | 3,090,234 | |||||||
1,859,376 | FHMS, Series K-J13 | 2.06 | % | 09/25/2021 | 1,853,835 | |||||||
1,100,000 | FHMS, Series K-J18 | 2.46 | % | 03/25/2022 | 1,100,237 | |||||||
887,015 | FHMS, Series K-J09 | 2.02 | % | 04/25/2022 | 880,352 | |||||||
16,195,380 | FHMS, Series K-721#~ | 0.34 | % | 08/25/2022 | 211,942 | |||||||
1,689,693 | FHMS, Series K-J07# | 1.53 | % | 09/25/2022 | 1,645,232 | |||||||
123,470 | FHMS, Series K-J12 | 2.38 | % | 04/25/2023 | 123,379 | |||||||
2,971,979 | FHMS, Series K-J14 | 2.20 | % | 11/25/2023 | 2,933,367 | |||||||
6,110,000 | FHMS, Series K-725 | 3.00 | % | 01/25/2024 | 6,253,714 | |||||||
1,955,000 | FHMS, Series K-728# | 3.06 | % | 08/25/2024 | 2,005,713 | |||||||
2,244,802 | FHMS, Series K-J17 | 2.40 | % | 10/25/2024 | 2,235,819 | |||||||
27,791,449 | FHMS, Series K-046#~ | 0.38 | % | 03/25/2025 | 659,444 | |||||||
7,124,243 | FHMS, Series K-055#~ | 1.37 | % | 03/25/2026 | 657,863 | |||||||
7,605,532 | FHMS, Series K-056 X1#~ | 1.27 | % | 05/25/2026 | 655,870 | |||||||
6,735,793 | FHMS, Series K-057#~ | 1.19 | % | 07/25/2026 | 561,524 | |||||||
5,439,102 | FHMS, Series K-058#~ | 0.93 | % | 08/25/2026 | 366,220 | |||||||
4,415,600 | FHMS, Series K-W03 X1#~ | 0.85 | % | 06/25/2027 | 265,102 | |||||||
3,817,979 | FHMS, Series Q-004# | 2.66 | % | 01/25/2046 | 3,853,673 | |||||||
1,281 | FNMA, Pool# 683378 | 5.00 | % | 02/01/2018 | 1,305 | |||||||
33,089 | FNMA, Pool# 254953 | 5.00 | % | 11/01/2018 | 33,701 | |||||||
33,758 | FNMA, Pool# 725048 | 5.00 | % | 11/01/2018 | 34,382 | |||||||
34,096 | FNMA, Pool# 765178 | 5.00 | % | 01/01/2019 | 34,726 | |||||||
55,876 | FNMA, Pool# AL0472 | 5.50 | % | 01/01/2019 | 56,263 |
The accompanying notes are an integral part of these financial statements.
64
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% (Continued) | ||||||||||||
5,469 | FNMA, Pool# 485352 | 6.00 | % | 02/01/2019 | 6,113 | |||||||
17,611 | FNMA, Pool# AA8642 | 4.50 | % | 03/01/2019 | 17,892 | |||||||
5,706 | FNMA, Pool# 252386 | 6.50 | % | 04/01/2019 | 6,326 | |||||||
10,430 | FNMA, Pool# 931245 | 4.50 | % | 05/01/2019 | 10,597 | |||||||
39,668 | FNMA, Pool# MA0137 | 5.00 | % | 06/01/2019 | 40,405 | |||||||
38,400 | FNMA, Pool# 932309 | 5.00 | % | 06/01/2019 | 38,346 | |||||||
54,453 | FNMA, Pool# 779356 | 6.50 | % | 06/01/2019 | 55,235 | |||||||
119,490 | FNMA, Pool# 776388 | 5.50 | % | 07/01/2019 | 120,904 | |||||||
81,578 | FNMA, Pool# 773482 | 4.50 | % | 08/01/2019 | 82,476 | |||||||
27,568 | FNMA, Pool# 786729 | 5.50 | % | 08/01/2019 | 27,930 | |||||||
5,652 | FNMA, Pool# 803941 (12 Month LIBOR USD + 1.81%) | 3.56 | % | 11/01/2019 | 5,686 | |||||||
66,831 | FNMA, Pool# 803899 | 5.00 | % | 12/01/2019 | 68,277 | |||||||
11,132 | FNMA, Pool# AD0672 | 4.50 | % | 01/01/2020 | 11,309 | |||||||
17,071 | FNMA, Pool# MA0300 | 4.50 | % | 01/01/2020 | 17,344 | |||||||
19,227 | FNMA, Pool# 808905 | 5.00 | % | 01/01/2020 | 19,584 | |||||||
18,196 | FNMA, Pool# MA0323 | 4.50 | % | 02/01/2020 | 18,486 | |||||||
31,956 | FNMA, Pool# 798042 | 5.00 | % | 02/01/2020 | 32,636 | |||||||
75,296 | FNMA, Pool# 801577 | 5.00 | % | 02/01/2020 | 76,693 | |||||||
12,503 | FNMA, Pool# MA0408 | 5.00 | % | 03/01/2020 | 12,735 | |||||||
7,722 | FNMA, Pool# MA0419 | 4.50 | % | 05/01/2020 | 7,845 | |||||||
527,975 | FNMA, Pool# 823327 | 5.00 | % | 06/01/2020 | 543,087 | |||||||
46,438 | FNMA, Pool# 809099 | 5.50 | % | 06/01/2020 | 47,301 | |||||||
66,139 | FNMA, Pool# 255736 | 5.50 | % | 06/01/2020 | 67,686 | |||||||
184,236 | FNMA, Pool# AC0884 | 5.00 | % | 07/01/2020 | 187,656 | |||||||
94,320 | FNMA, Pool# 828696 | 5.50 | % | 07/01/2020 | 96,571 | |||||||
154,772 | FNMA, Pool# 823328 | 5.50 | % | 07/01/2020 | 158,880 | |||||||
11,383 | FNMA, Pool# AL0560 | 4.50 | % | 08/01/2020 | 11,565 | |||||||
62,854 | FNMA, Pool# MA0517 | 4.00 | % | 09/01/2020 | 64,717 | |||||||
41,342 | FNMA, Pool# 255891 | 5.00 | % | 10/01/2020 | 42,291 | |||||||
11,302 | FNMA, Pool# MA0613 | 4.00 | % | 11/01/2020 | 11,637 | |||||||
124,506 | FNMA, Pool# 255937 | 5.00 | % | 11/01/2020 | 128,417 | |||||||
30,790 | FNMA, Pool# 813939 | 5.00 | % | 12/01/2020 | 31,704 | |||||||
43,034 | FNMA, Pool# 837189 | 5.00 | % | 12/01/2020 | 44,585 | |||||||
9,109 | FNMA, Pool# MA0660 | 4.00 | % | 02/01/2021 | 9,379 | |||||||
77,766 | FNMA, Pool# 850791 | 5.00 | % | 02/01/2021 | 79,257 | |||||||
1,422,409 | FNMA, Pool# 745735 | 5.00 | % | 03/01/2021 | 1,462,680 | |||||||
266,076 | FNMA, Pool# 879595 | 5.50 | % | 03/01/2021 | 273,011 | |||||||
28,579 | FNMA, Pool# 831360 | 5.50 | % | 03/01/2021 | 29,433 | |||||||
51,096 | FNMA, Pool# 831430 | 5.50 | % | 03/01/2021 | 52,363 | |||||||
48,885 | FNMA, Pool# 256277 | 5.50 | % | 06/01/2021 | 50,844 | |||||||
10,784 | FNMA, Pool# MA0805 | 4.00 | % | 07/01/2021 | 11,176 | |||||||
96,968 | FNMA, Pool# 253945 | 6.50 | % | 08/01/2021 | 107,522 | |||||||
142,322 | FNMA, Pool# AD0167 | 5.50 | % | 09/01/2021 | 146,978 | |||||||
54,741 | FNMA, Pool# 254000 | 6.50 | % | 09/01/2021 | 60,700 | |||||||
26,142 | FNMA, Pool# 254044 | 6.50 | % | 10/01/2021 | 28,988 | |||||||
154,119 | FNMA, Pool# 254085 | 6.00 | % | 11/01/2021 | 172,279 | |||||||
28,716 | FNMA, Pool# 889212 | 5.00 | % | 12/01/2021 | 29,276 | |||||||
99,099 | FNMA, Pool# 254138 | 6.00 | % | 12/01/2021 | 110,776 | |||||||
93,407 | FNMA, Pool# 922791 | 6.50 | % | 12/01/2021 | 95,620 | |||||||
93,736 | FNMA, Pool# 254179 | 6.00 | % | 01/01/2022 | 104,781 | |||||||
72,923 | FNMA, Pool# 254295 | 6.00 | % | 04/01/2022 | 81,515 | |||||||
32,110 | FNMA, Pool# 888410 | 6.50 | % | 04/01/2022 | 33,468 | |||||||
248,070 | FNMA, Pool# 889135 | 5.50 | % | 06/01/2022 | 253,824 | |||||||
25,925 | FNMA, Pool# 254420 | 6.00 | % | 07/01/2022 | 28,980 | |||||||
155,710 | FNMA, Pool# 254440 | 6.00 | % | 08/01/2022 | 174,057 | |||||||
37,095 | FNMA, Pool# 947936 | 5.50 | % | 11/01/2022 | 38,940 |
The accompanying notes are an integral part of these financial statements.
65
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% (Continued) | ||||||||||||
44,103 | FNMA, Pool# 965546 | 5.50 | % | 01/01/2023 | 45,604 | |||||||
152,117 | FNMA, Pool# 929139 | 5.00 | % | 02/01/2023 | 160,174 | |||||||
154,999 | FNMA, Pool# 972080 | 5.00 | % | 02/01/2023 | 163,623 | |||||||
183,719 | FNMA, Pool# 976947 | 6.00 | % | 02/01/2023 | 194,895 | |||||||
549,935 | FNMA, Pool# 929224 | 5.00 | % | 03/01/2023 | 580,400 | |||||||
147,062 | FNMA, Pool# AD0892 | 5.00 | % | 03/01/2023 | 153,877 | |||||||
40,632 | FNMA, Pool# 962717 | 5.50 | % | 04/01/2023 | 42,578 | |||||||
190,011 | FNMA, Pool# 987208 | 5.00 | % | 07/01/2023 | 200,614 | |||||||
105,970 | FNMA, Pool# 929933 | 5.00 | % | 09/01/2023 | 111,724 | |||||||
183,351 | FNMA, Pool# 988940 | 5.50 | % | 09/01/2023 | 194,179 | |||||||
860,321 | FNMA, Pool# 995185 | 5.00 | % | 12/01/2023 | 908,216 | |||||||
416,532 | FNMA, Pool# 995460 | 5.50 | % | 12/01/2023 | 435,899 | |||||||
106,790 | FNMA, Pool# 995264 | 6.50 | % | 12/01/2023 | 114,279 | |||||||
107,400 | FNMA, Pool# AD0283 | 5.50 | % | 01/01/2024 | 111,182 | |||||||
242,803 | FNMA, Pool# AL7409 | 6.00 | % | 02/01/2024 | 256,564 | |||||||
217,770 | FNMA, Pool# MA1937 | 4.00 | % | 03/01/2024 | 224,529 | |||||||
162,991 | FNMA, Pool# 890163 | 5.50 | % | 03/01/2024 | 170,270 | |||||||
157,669 | FNMA, Pool# AL0302 | 5.00 | % | 04/01/2024 | 165,601 | |||||||
255,409 | FNMA, Pool# 995961 | 5.50 | % | 05/01/2024 | 266,674 | |||||||
24,676 | FNMA, Pool# 934900 | 5.50 | % | 07/01/2024 | 25,644 | |||||||
1,144,521 | FNMA, Pool# MA2020 | 2.50 | % | 09/01/2024 | 1,151,265 | |||||||
2,205,351 | FNMA, Pool# BC4577 | 4.50 | % | 09/01/2024 | 2,325,971 | |||||||
8,584,745 | FNMA, Pool# BM3006 | 6.00 | % | 11/01/2024 | 9,072,356 | |||||||
186,475 | FNMA, Pool# AC8540 | 4.50 | % | 12/01/2024 | 196,655 | |||||||
1,456,993 | FNMA, Pool# AC6697 | 4.00 | % | 01/01/2025 | 1,526,425 | |||||||
174,997 | FNMA, Pool# AD5988 | 4.50 | % | 05/01/2025 | 184,576 | |||||||
2,386,988 | FNMA, Pool# MA2286 | 2.50 | % | 06/01/2025 | 2,401,092 | |||||||
101,764 | FNMA, Pool# AE0284 | 5.00 | % | 07/01/2025 | 107,790 | |||||||
146,645 | FNMA, Pool# AL1081 | 5.00 | % | 07/01/2025 | 151,196 | |||||||
268,448 | FNMA, Pool# AL1373 | 5.00 | % | 09/01/2025 | 279,916 | |||||||
70,174 | FNMA, Pool# 336422 (3 Year CMT Rate + 2.30%) | 3.46 | % | 10/01/2025 | 70,460 | |||||||
145,591 | FNMA, Pool# 356232 | 6.50 | % | 01/01/2026 | 161,466 | |||||||
100,827 | FNMA, Pool# 890591 | 4.50 | % | 03/01/2026 | 106,322 | |||||||
244,801 | FNMA, Pool# AI1806 | 4.50 | % | 04/01/2026 | 258,467 | |||||||
53,630 | FNMA, Pool# 406521 (1 Year CMT Rate + 2.52%) | 3.65 | % | 05/01/2026 | 54,099 | |||||||
146,453 | FNMA, Pool# 890400 | 5.00 | % | 08/01/2026 | 154,744 | |||||||
77,646 | FNMA, Pool# 356329 (1 Year CMT Rate + 2.64%) | 4.01 | % | 01/01/2027 | 78,993 | |||||||
5,597,418 | FNMA, Pool# BM1809 | 4.50 | % | 01/01/2027 | 5,907,575 | |||||||
52,237 | FNMA, Pool# 363850 (1 Year CMT Rate + 2.13%) | 2.89 | % | 04/01/2027 | 53,628 | |||||||
56,131 | FNMA, Pool# 406380 (1 Year CMT Rate + 2.17%) | 3.21 | % | 11/01/2027 | 56,952 | |||||||
934,885 | FNMA, Pool# 957502 | 3.98 | % | 07/01/2029 | 977,509 | |||||||
55,052 | FNMA, Pool# 520478 (1 Year CMT Rate + 2.10%) | 3.35 | % | 11/01/2029 | 55,693 | |||||||
46,575 | FNMA, Pool# 559439 (1 Year CMT Rate + 2.27%) | 3.52 | % | 09/01/2030 | 47,467 | |||||||
61,400 | FNMA, Pool# 573097 (1 Year CMT Rate + 2.21%) | 3.46 | % | 02/01/2031 | 61,966 | |||||||
45,869 | FNMA, Pool# 590852 (1 Year CMT Rate + 2.11%) | 3.24 | % | 07/01/2031 | 46,170 | |||||||
71,036 | FNMA, Pool# 656181 (1 Year CMT Rate + 2.16%) | 3.13 | % | 08/01/2031 | 73,541 | |||||||
44,634 | FNMA, Pool# 723313 (1 Year CMT Rate + 2.54%) | 3.67 | % | 09/01/2031 | 44,803 | |||||||
7,481 | FNMA, Pool# 625536 | 6.00 | % | 01/01/2032 | 8,364 | |||||||
56,364 | FNMA, Pool# 642122 (1 Year CMT Rate + 2.27%) | 3.15 | % | 03/01/2032 | 58,684 | |||||||
35,682 | FNMA, Pool# 628837 | 6.50 | % | 03/01/2032 | 39,581 | |||||||
46,935 | FNMA, Pool# 640225 (1 Year CMT Rate + 2.27%) | 3.15 | % | 04/01/2032 | 49,087 | |||||||
47,235 | FNMA, Pool# 662138 (1 Year CMT Rate + 2.30%) | 3.43 | % | 09/01/2032 | 47,980 | |||||||
59,154 | FNMA, Pool# 668309 (1 Year CMT Rate + 2.02%) | 3.14 | % | 11/01/2032 | 59,347 | |||||||
58,321 | FNMA, Pool# 675634 (1 Year CMT Rate + 2.00%) | 3.25 | % | 12/01/2032 | 59,432 | |||||||
62,204 | FNMA, Pool# 696546 (6 Month LIBOR USD + 2.26%) | 3.76 | % | 03/01/2033 | 62,485 | |||||||
95,214 | FNMA, Pool# 696219 (6 Month LIBOR USD + 1.38%) | 2.88 | % | 04/01/2033 | 97,447 |
The accompanying notes are an integral part of these financial statements.
66
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% (Continued) | ||||||||||||
113,662 | FNMA, Pool# 702901 | 6.00 | % | 05/01/2033 | 130,010 | |||||||
72,616 | FNMA, Pool# 721381 (1 Year CMT Rate + 2.25%) | 3.25 | % | 06/01/2033 | 73,359 | |||||||
43,581 | FNMA, Pool# 555819 (6 Month LIBOR USD + 1.51%) | 3.14 | % | 07/01/2033 | 45,104 | |||||||
50,898 | FNMA, Pool# 744805 (6 Month LIBOR USD + 1.52%) | 3.02 | % | 11/01/2033 | 51,651 | |||||||
47,245 | FNMA, Pool# 751498 (1 Year CMT Rate + 2.22%) | 3.46 | % | 11/01/2033 | 50,069 | |||||||
31,899 | FNMA, Pool# 741373 (1 Year CMT Rate + 2.28%) | 3.53 | % | 12/01/2033 | 33,049 | |||||||
32,335 | FNMA, Pool# 754767 | 6.50 | % | 12/01/2033 | 35,850 | |||||||
76,146 | FNMA, Pool# 764342 (6 Month LIBOR USD + 1.52%) | 3.02 | % | 02/01/2034 | 78,671 | |||||||
187,148 | FNMA, Pool# 774969 (1 Year CMT Rate + 2.20%) | 2.95 | % | 04/01/2034 | 195,226 | |||||||
135,593 | FNMA, Pool# 783554 (1 Year CMT Rate + 2.21%) | 3.34 | % | 07/01/2034 | 138,187 | |||||||
52,859 | FNMA, Pool# 789060 (12 Month LIBOR USD + 1.75%) | 3.53 | % | 07/01/2034 | 55,453 | |||||||
24,010 | FNMA, Pool# 796283 | 5.50 | % | 12/01/2034 | 26,468 | |||||||
53,262 | FNMA, Pool# 819649 (12 Month LIBOR USD + 1.52%) | 3.23 | % | 03/01/2035 | 55,707 | |||||||
53,614 | FNMA, Pool# 830970 (12 Month LIBOR USD + 1.83%) | 3.58 | % | 08/01/2035 | 56,454 | |||||||
154,589 | FNMA, Pool# 837329 (1 Year CMT Rate + 2.04%) | 3.17 | % | 09/01/2035 | 162,410 | |||||||
82,496 | FNMA, Pool# 836335 (1 Year CMT Rate + 2.23%) | 3.48 | % | 10/01/2035 | 82,635 | |||||||
115,447 | FNMA, Pool# 836715 (12 Month LIBOR USD + 1.74%) | 3.49 | % | 10/01/2035 | 115,582 | |||||||
152,732 | FNMA, Pool# 842006 | 4.25 | % | 10/01/2035 | 161,132 | |||||||
78,307 | FNMA, Pool# 922680 (12 Month LIBOR USD + 1.91%) | 3.69 | % | 11/01/2035 | 82,769 | |||||||
297,137 | FNMA, Pool# 850232 | 4.25 | % | 12/01/2035 | 313,709 | |||||||
8,606 | FNMA, Pool# 848817 | 5.00 | % | 01/01/2036 | 9,262 | |||||||
47,688 | FNMA, Pool# 865849 (12 Month LIBOR USD + 1.50%) | 3.22 | % | 03/01/2036 | 49,299 | |||||||
78,407 | FNMA, Pool# 877009 (12 Month LIBOR USD + 2.38%) | 4.14 | % | 03/01/2036 | 84,475 | |||||||
89,783 | FNMA, Pool# 868568 (12 Month LIBOR USD + 1.78%) | 3.53 | % | 04/01/2036 | 94,531 | |||||||
80,877 | FNMA, Pool# 882017 (6 Month LIBOR USD + 1.56%) | 3.06 | % | 05/01/2036 | 83,877 | |||||||
61,011 | FNMA, Pool# 745626 (1 Year CMT Rate + 2.11%) | 3.19 | % | 05/01/2036 | 63,538 | |||||||
52,223 | FNMA, Pool# 872895 (12 Month LIBOR USD + 1.73%) | 3.51 | % | 06/01/2036 | 54,938 | |||||||
43,997 | FNMA, Pool# 886163 (12 Month LIBOR USD + 1.81%) | 3.59 | % | 07/01/2036 | 46,328 | |||||||
146,471 | FNMA, Pool# AD0766 | 7.00 | % | 08/01/2036 | 171,685 | |||||||
218,452 | FNMA, Pool# 745818 | 6.50 | % | 09/01/2036 | 242,775 | |||||||
178,565 | FNMA, Pool# 894270 (1 Year CMT Rate + 2.50%) | 3.75 | % | 10/01/2036 | 179,357 | |||||||
53,919 | FNMA, Pool# 905193 (12 Month LIBOR USD + 1.99%) | 3.74 | % | 11/01/2036 | 55,293 | |||||||
88,642 | FNMA, Pool# 902770 | 5.38 | % | 11/01/2036 | 96,610 | |||||||
94,707 | FNMA, Pool# 906289 | 5.38 | % | 12/01/2036 | 103,194 | |||||||
133,618 | FNMA, Pool# 940309 (12 Month LIBOR USD + 1.50%) | 3.25 | % | 01/01/2037 | 136,257 | |||||||
59,558 | FNMA, Pool# 910181 (12 Month LIBOR USD + 1.71%) | 3.45 | % | 03/01/2037 | 62,407 | |||||||
83,471 | FNMA, Pool# 888445 (12 Month LIBOR USD + 1.57%) | 3.31 | % | 04/01/2037 | 89,230 | |||||||
74,738 | FNMA, Pool# 995521 (12 Month LIBOR USD + 1.84%) | 3.61 | % | 05/01/2037 | 78,354 | |||||||
98,669 | FNMA, Pool# 950382 (6 Month LIBOR USD + 1.09%) | 2.58 | % | 08/01/2037 | 100,632 | |||||||
170,149 | FNMA, Pool# 941050 (12 Month LIBOR USD + 1.70%) | 3.45 | % | 08/01/2037 | 169,022 | |||||||
65,995 | FNMA, Pool# 953988 | 5.38 | % | 08/01/2037 | 67,959 | |||||||
66,280 | FNMA, Pool# 946403 (1 Year CMT Rate + 2.32%) | 3.32 | % | 09/01/2037 | 66,225 | |||||||
71,424 | FNMA, Pool# 952835 (1 Year CMT Rate + 2.32%) | 3.40 | % | 09/01/2037 | 75,454 | |||||||
262,530 | FNMA, Pool# 955233 | 6.50 | % | 12/01/2037 | 303,860 | |||||||
225,185 | FNMA, Pool# 962656 (12 Month LIBOR USD + 1.17%) | 2.92 | % | 04/01/2038 | 231,563 | |||||||
53,303 | FNMA, Pool# 982237 (12 Month LIBOR USD + 1.84%) | 3.67 | % | 05/01/2038 | 56,731 | |||||||
194,841 | FNMA, Pool# 988684 | 6.00 | % | 09/01/2038 | 217,961 | |||||||
176,941 | FNMA, Pool# 930507 | 6.50 | % | 02/01/2039 | 197,767 | |||||||
3,987,214 | FNMA, Pool# AS2249 | 4.00 | % | 04/01/2039 | 4,191,392 | |||||||
14,098 | FNMA, Pool# AI1170 | 5.00 | % | 04/01/2041 | 15,208 | |||||||
415,134 | FNMA, Pool# MA1065 | 4.00 | % | 05/01/2042 | 436,166 | |||||||
12,540 | FNMA, Pool# AR1150 | 3.00 | % | 01/01/2043 | 12,612 | |||||||
2,741,838 | FNMA, Pool# AR6379 | 3.00 | % | 02/01/2043 | 2,760,072 | |||||||
1,205,270 | FNMA, Pool# AB8711 | 3.00 | % | 03/01/2043 | 1,214,268 | |||||||
964,024 | FNMA, Pool# BC1738 | 4.50 | % | 09/01/2043 | 1,031,411 | |||||||
1,952,705 | FNMA, Pool# AU6230 | 5.00 | % | 09/01/2043 | 2,106,311 |
The accompanying notes are an integral part of these financial statements.
67
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% (Continued) | ||||||||||||
790,669 | FNMA, Pool# AS1429 | 4.00 | % | 12/01/2043 | 828,771 | |||||||
2,247,980 | FNMA, Pool# BC1737 | 4.00 | % | 01/01/2044 | 2,363,082 | |||||||
621,108 | FNMA, Pool# AV7739 | 4.00 | % | 01/01/2044 | 657,924 | |||||||
955,030 | FNMA, Pool# AW6485 | 4.00 | % | 06/01/2044 | 1,005,332 | |||||||
980,096 | FNMA, Pool# AY0382 | 4.00 | % | 11/01/2044 | 1,008,875 | |||||||
201,672 | FNMA, Pool# AY1007 | 4.00 | % | 02/01/2045 | 211,152 | |||||||
1,384,920 | FNMA, Pool# AY0677 | 3.50 | % | 03/01/2045 | 1,430,977 | |||||||
839,643 | FNMA, Pool# AW9534 | 4.00 | % | 03/01/2045 | 882,976 | |||||||
926,107 | FNMA, Pool# AZ4154 | 4.00 | % | 06/01/2045 | 977,527 | |||||||
3,340,444 | FNMA, Pool# AZ7828 | 4.00 | % | 08/01/2045 | 3,496,787 | |||||||
440,617 | FNMA, Pool# AZ8061 | 4.00 | % | 08/01/2045 | 461,174 | |||||||
2,088,133 | FNMA, Pool# AZ8218 | 4.00 | % | 08/01/2045 | 2,186,714 | |||||||
189,805 | FNMA, Pool# AZ1494 | 4.00 | % | 09/01/2045 | 199,131 | |||||||
1,527,549 | FNMA, Pool# AZ7073 | 4.00 | % | 09/01/2045 | 1,601,478 | |||||||
303,662 | FNMA, Pool# BA2936 | 4.00 | % | 10/01/2045 | 318,357 | |||||||
1,406,260 | FNMA, Pool# BA3674 | 4.50 | % | 10/01/2045 | 1,504,670 | |||||||
546,195 | FNMA, Pool# BA5579 | 3.50 | % | 12/01/2045 | 561,259 | |||||||
1,098,797 | FNMA, Pool# BA5469 | 3.50 | % | 12/01/2045 | 1,132,862 | |||||||
1,376,416 | FNMA, Pool# BA5582 | 3.50 | % | 12/01/2045 | 1,414,380 | |||||||
1,527,588 | FNMA, Pool# BA5583 | 3.50 | % | 01/01/2046 | 1,581,640 | |||||||
1,413,142 | FNMA, Pool# BA5584 | 3.50 | % | 01/01/2046 | 1,460,094 | |||||||
1,567,721 | FNMA, Pool# BA5587 | 4.00 | % | 01/01/2046 | 1,654,588 | |||||||
2,754,959 | FNMA, Pool# BC1230 | 3.50 | % | 02/01/2046 | 2,838,929 | |||||||
1,178,102 | FNMA, Pool# BC1231 | 4.00 | % | 02/01/2046 | 1,243,461 | |||||||
806,589 | FNMA, Pool# BC6366 | 4.50 | % | 02/01/2046 | 860,890 | |||||||
2,147,135 | FNMA, Pool# BC1236 | 3.50 | % | 03/01/2046 | 2,206,356 | |||||||
670,287 | FNMA, Pool# BC3387 | 3.50 | % | 03/01/2046 | 689,788 | |||||||
2,270,809 | FNMA, Pool# BC1241 | 3.50 | % | 04/01/2046 | 2,333,442 | |||||||
1,056,352 | FNMA, Pool# BC1240 | 3.50 | % | 04/01/2046 | 1,090,351 | |||||||
1,095,239 | FNMA, Pool# BD1241 | 4.50 | % | 05/01/2046 | 1,180,364 | |||||||
1,486,772 | FNMA, Pool# BD1026 | 4.00 | % | 06/01/2046 | 1,556,190 | |||||||
1,671,245 | FNMA, Pool# BD5189 | 4.50 | % | 07/01/2046 | 1,797,925 | |||||||
1,066,720 | FNMA, Pool# BD7779 | 4.00 | % | 08/01/2046 | 1,127,050 | |||||||
1,151,431 | FNMA, Pool# BD3965 | 3.50 | % | 09/01/2046 | 1,186,688 | |||||||
1,421,715 | FNMA, Pool# BE0297 | 3.50 | % | 09/01/2046 | 1,464,660 | |||||||
1,123,860 | FNMA, Pool# BD8599 | 4.50 | % | 11/01/2046 | 1,222,393 | |||||||
1,157,051 | FNMA, Pool# BD3988 | 4.00 | % | 02/01/2047 | 1,211,366 | |||||||
1,369,591 | FNMA, Pool# BE8112 | 4.00 | % | 02/01/2047 | 1,433,950 | |||||||
3,035,597 | FNMA, Pool# BE7470 | 4.00 | % | 02/01/2047 | 3,177,772 | |||||||
1,181,979 | FNMA, Pool# BE8875 | 4.00 | % | 03/01/2047 | 1,237,520 | |||||||
2,759,716 | FNMA, Pool# BE2368 | 4.50 | % | 03/01/2047 | 2,950,443 | |||||||
1,011,514 | FNMA, Pool# BH0264 | 4.50 | % | 03/01/2047 | 1,077,494 | |||||||
1,509,318 | FNMA, Pool# BD3994 | 4.00 | % | 04/01/2047 | 1,580,328 | |||||||
1,096,275 | FNMA, Pool# BH0073 | 4.00 | % | 04/01/2047 | 1,149,352 | |||||||
1,149,424 | FNMA, Pool# BD3998 | 4.00 | % | 05/01/2047 | 1,205,146 | |||||||
1,072,969 | FNMA, Pool# BD3999 | 4.50 | % | 05/01/2047 | 1,147,239 | |||||||
1,159,638 | FNMA, Pool# BD4003 | 4.00 | % | 06/01/2047 | 1,221,470 | |||||||
1,836,294 | FNMA, Pool# BD4004 | 4.00 | % | 06/01/2047 | 1,922,876 | |||||||
1,254,879 | FNMA, Pool# BD4005 | 3.50 | % | 07/01/2047 | 1,298,664 | |||||||
1,126,907 | FNMA, Pool# BD4009 | 4.00 | % | 07/01/2047 | 1,203,489 | |||||||
1,108,556 | FNMA, Pool# BH3574 | 4.00 | % | 07/01/2047 | 1,162,357 | |||||||
1,081,155 | FNMA, Pool# BD4010 | 4.00 | % | 07/01/2047 | 1,152,403 | |||||||
1,107,311 | FNMA, Pool# BD4011 | 4.00 | % | 07/01/2047 | 1,170,496 | |||||||
783,605 | FNMA, Pool# BJ1740 | 4.50 | % | 10/01/2047 | 837,967 | |||||||
1,391,955 | FNMA, Pool# BJ1991 | 4.00 | % | 11/01/2047 | 1,459,599 | |||||||
813,006 | FNMA, Pool# BD4041 | 4.00 | % | 11/01/2047 | 860,571 |
The accompanying notes are an integral part of these financial statements.
68
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% (Continued) | ||||||||||||
1,194,879 | FNMA, Pool# BH7686 | 4.50 | % | 12/01/2047 | 1,277,771 | |||||||
2,225,712 | FNMA REMIC Trust, Series 2014-M1# | 2.32 | % | 11/25/2018 | 2,228,851 | |||||||
28,928 | FNMA REMIC Trust, Series 2003-122 | 4.00 | % | 12/25/2018 | 29,037 | |||||||
39 | FNMA REMIC Trust, Series 1990-105 | 6.50 | % | 09/25/2020 | 41 | |||||||
92,985 | FNMA REMIC Trust, Series 1990-116 | 9.00 | % | 10/25/2020 | 98,882 | |||||||
72,751 | FNMA REMIC Trust, Series 1991-136 | 7.50 | % | 10/25/2021 | 77,714 | |||||||
4,624 | FNMA REMIC Trust, Series 2012-1 | 1.75 | % | 12/25/2021 | 4,602 | |||||||
176,834 | FNMA REMIC Trust, Series 1996-23 | 6.50 | % | 07/25/2026 | 195,529 | |||||||
1,499,679 | FNMA REMIC Trust, Series 2017-T1 | 2.90 | % | 06/25/2027 | 1,493,520 | |||||||
1,705,000 | FNMA REMIC Trust, Series 2017-M13 A2# | 2.94 | % | 09/25/2027 | 1,719,914 | |||||||
3,152,807 | FNMA REMIC Trust, Series 2012-139~ | 2.50 | % | 12/25/2027 | 269,444 | |||||||
223,301 | FNMA REMIC Trust, Series 2013-15~ | 3.00 | % | 03/25/2028 | 20,591 | |||||||
160,344 | FNMA REMIC Trust, Series 2009-60 | 5.00 | % | 08/25/2029 | 172,024 | |||||||
3,042,889 | FNMA REMIC Trust, Series 2013-115~ | 3.00 | % | 04/25/2031 | 369,277 | |||||||
8,820,780 | FNMA REMIC Trust, Series 2014-14~ | 3.00 | % | 04/25/2031 | 657,156 | |||||||
383,306 | FNMA REMIC Trust, Series 2001-80 | 6.00 | % | 01/25/2032 | 412,112 | |||||||
7,019,425 | FNMA REMIC Trust, Series 2013-104~ | 3.00 | % | 08/25/2032 | 570,662 | |||||||
113,987 | FNMA REMIC Trust, Series 2012-30 | 3.00 | % | 08/25/2036 | 114,637 | |||||||
90,161 | FNMA REMIC Trust, Series 2009-103# | 3.51 | % | 12/25/2039 | 96,135 | |||||||
287,581 | FNMA REMIC Trust, Series 2012-10 (1 Month LIBOR USD + 0.55%) | 2.10 | % | 02/25/2042 | 289,392 | |||||||
1,582,702 | FNMA REMIC Trust, Series 2013-34~ | 3.00 | % | 05/25/2042 | 234,350 | |||||||
1,227,449 | FNMA REMIC Trust, Series 2012-99~ | 4.50 | % | 05/25/2042 | 200,454 | |||||||
13,606 | FNMA REMIC Trust, Series 2003-W10 | 4.30 | % | 06/25/2043 | 14,153 | |||||||
4,634 | FNMA REMIC Trust, Series 2003-W12 | 4.48 | % | 06/25/2043 | 4,830 | |||||||
27,803 | FNMA REMIC Trust, Series 2003-W12 | 4.55 | % | 06/25/2043 | 29,462 | |||||||
15,385 | FNMA REMIC Trust, Series 2003-W12 | 4.68 | % | 06/25/2043 | 16,170 | |||||||
17,949 | FNMA REMIC Trust, Series 2003-W12 | 5.00 | % | 06/25/2043 | 19,069 | |||||||
1,271,589 | FNMA REMIC Trust, Series 2015-40~ | 4.50 | % | 03/25/2045 | 294,752 | |||||||
14,500,000 | FNMA, 2.5%, Due TBA January | 2.50 | % | 01/15/2032 | 14,478,477 | |||||||
11,000,000 | FNMA, 3.0%, Due TBA January | 3.00 | % | 01/15/2032 | 11,204,961 | |||||||
8,000,000 | FNMA, 3.0%, Due TBA January | 3.00 | % | 01/15/2047 | 8,000,625 | |||||||
227,326 | Freddie Mac Gold Pool, Pool# G1-2959 | 6.50 | % | 10/01/2022 | 241,815 | |||||||
117,937 | Freddie Mac Gold Pool, Pool# G1-2890 | 5.50 | % | 12/01/2022 | 123,919 | |||||||
97,722 | Freddie Mac Gold Pool, Pool# G1-3121 | 5.00 | % | 04/01/2023 | 102,628 | |||||||
75,497 | Freddie Mac Gold Pool, Pool# G1-3299 | 6.00 | % | 07/01/2023 | 79,595 | |||||||
602,122 | Freddie Mac Gold Pool, Pool# G1-3382 | 5.50 | % | 12/01/2023 | 638,573 | |||||||
4,578,566 | Freddie Mac Gold Pool, Pool# G1-6375 | 6.00 | % | 01/01/2024 | 4,851,059 | |||||||
1,406,840 | Freddie Mac Gold Pool, Pool# G1-3787 | 6.00 | % | 01/01/2024 | 1,474,655 | |||||||
200,853 | Freddie Mac Gold Pool, Pool# G1-3603 | 5.50 | % | 02/01/2024 | 209,670 | |||||||
141,013 | Freddie Mac Gold Pool, Pool# G1-3840 | 5.50 | % | 09/01/2024 | 146,398 | |||||||
107,980 | Freddie Mac Gold Pool, Pool# G1-3709 | 4.50 | % | 12/01/2024 | 113,190 | |||||||
148,710 | Freddie Mac Gold Pool, Pool# G1-3751 | 5.50 | % | 12/01/2024 | 157,533 | |||||||
467,412 | Freddie Mac Gold Pool, Pool# G1-3827 | 5.00 | % | 03/01/2025 | 491,107 | |||||||
231,304 | Freddie Mac Gold Pool, Pool# G1-4855 | 5.00 | % | 06/01/2026 | 241,051 | |||||||
1,950,000 | FREMF Mortgage Trust, Series 2017-K729#^ | 3.67 | % | 11/25/2024 | 1,939,208 | |||||||
28,071 | GNMA, Pool# 003577M | 5.50 | % | 07/20/2019 | 28,433 | |||||||
14,586 | GNMA, Pool# 003644M | 4.00 | % | 09/20/2019 | 14,983 | |||||||
140,651 | GNMA, Pool# 781942X | 5.50 | % | 07/15/2020 | 143,825 | |||||||
133,579 | GNMA, Pool# 782602X | 5.00 | % | 09/15/2022 | 139,540 | |||||||
42,063 | GNMA, Pool# 672304X | 6.00 | % | 10/15/2022 | 43,632 | |||||||
5,838 | GNMA, Pool# 780576X | 7.00 | % | 12/15/2022 | 6,338 | |||||||
72,102 | GNMA, Pool# 672701X | 4.00 | % | 05/15/2023 | 74,705 | |||||||
181,805 | GNMA, Pool# 615782X | 5.00 | % | 09/15/2023 | 195,470 | |||||||
61,176 | GNMA, Pool# 782396X | 6.00 | % | 09/15/2023 | 65,285 | |||||||
55,105 | GNMA, Pool# 004295M | 6.00 | % | 10/20/2023 | 56,590 | |||||||
449,140 | GNMA, Pool# 783374X | 5.50 | % | 04/15/2024 | 473,229 |
The accompanying notes are an integral part of these financial statements.
69
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Mortgage Backed Securities — 94.8% (Continued) | ||||||||||||
27,090 | GNMA, Pool# 710732X | 4.50 | % | 08/15/2024 | 28,681 | |||||||
25,412 | GNMA, Pool# 723460X | 4.00 | % | 12/15/2024 | 26,491 | |||||||
170,525 | GNMA, Pool# 783296X | 5.00 | % | 01/15/2025 | 181,692 | |||||||
188,681 | GNMA, Pool# 643800X | 6.00 | % | 06/15/2025 | 211,573 | |||||||
371,641 | GNMA, Pool# 005247M | 3.50 | % | 11/20/2026 | 376,338 | |||||||
10,612 | GNMA, Pool# 487110X | 6.50 | % | 04/15/2029 | 12,111 | |||||||
527,196 | GNMA, Pool# 589694X | 4.50 | % | 08/15/2029 | 560,044 | |||||||
4,809 | GNMA, Pool# 571166X | 7.00 | % | 08/15/2031 | 4,920 | |||||||
1,815,180 | GNMA, Pool# 752099X | 3.50 | % | 12/15/2032 | 1,900,714 | |||||||
358,274 | GNMA, Pool# 758872X | 3.00 | % | 03/15/2033 | 362,805 | |||||||
2,154,655 | GNMA, Pool# 711773C | 3.50 | % | 06/20/2033 | 2,229,787 | |||||||
1,280,785 | GNMA, Pool# 711788C | 3.50 | % | 07/20/2033 | 1,325,397 | |||||||
9,024 | GNMA, Pool# 646058X | 6.00 | % | 11/15/2037 | 10,095 | |||||||
453,221 | GNMA, Pool# 767055X | 3.00 | % | 05/15/2038 | 460,504 | |||||||
557,529 | GNMA, Pool# 763853X | 3.00 | % | 07/15/2038 | 566,483 | |||||||
102,042 | GNMA, Pool# 706295C | 5.10 | % | 12/20/2038 | 109,261 | |||||||
106,398 | GNMA, Pool# 706155C | 5.10 | % | 03/20/2039 | 113,924 | |||||||
515,433 | GNMA, Pool# 728160X | 5.25 | % | 11/15/2024 | 541,279 | |||||||
524,638 | GNMA, Pool# 770225C | 4.25 | % | 08/20/2031 | 555,793 | |||||||
13,000,000 | GNMA II, 3.0%, Due TBA January | 3.00 | % | 01/15/2047 | 13,118,828 | |||||||
20,000,000 | GNMA II, 3.5%, Due TBA January | 3.50 | % | 01/15/2047 | 20,676,563 | |||||||
8,268 | GNMA REMIC Trust, Series 201-03 | 3.00 | % | 01/16/2027 | 8,399 | |||||||
994,063 | GNMA REMIC Trust, Series 2013-168~ | 2.50 | % | 11/16/2028 | 80,567 | |||||||
417 | GNMA REMIC Trust, Series 2003-97 | 4.50 | % | 03/20/2033 | 424 | |||||||
145,933 | GNMA REMIC Trust, Series 2003-94 | 4.00 | % | 04/16/2033 | 152,881 | |||||||
200,433 | GNMA REMIC Trust, Series 2006-40 | 6.00 | % | 08/20/2036 | 219,420 | |||||||
993,225 | GNMA REMIC Trust, Series 2012-52# | 6.15 | % | 04/20/2038 | 1,126,114 | |||||||
682,000 | GNMA REMIC Trust, Series 2011-156 | 2.00 | % | 04/20/2040 | 563,700 | |||||||
831,612 | GNMA REMIC Trust, Series 2012-97 | 2.00 | % | 08/16/2042 | 711,120 | |||||||
535,521 | GNMA REMIC Trust, Series 2011-121 (1 Month LIBOR USD + 0.40%) | 1.89 | % | 03/16/2043 | 534,649 | |||||||
725,000 | GNMA REMIC Trust, Series 2012-44 | 2.95 | % | 08/16/2043 | 723,886 | |||||||
4,804,846 | GNMA REMIC Trust, Series 2014-135 I0#~ | 0.83 | % | 01/16/2056 | 239,228 | |||||||
4,795,115 | GNMA REMIC Trust, Series 2015-172 I0#~ | 0.92 | % | 03/16/2057 | 292,299 | |||||||
6,474,132 | GNMA REMIC Trust, Series 2016-40 I0#~ | 0.78 | % | 07/16/2057 | 376,159 | |||||||
5,284,664 | GNMA REMIC Trust, Series 2016-56 I0#~ | 0.99 | % | 11/16/2057 | 379,612 | |||||||
6,297,026 | GNMA REMIC Trust, Series 2016-127 I0#~ | 0.95 | % | 05/16/2058 | 467,578 | |||||||
6,140,153 | GNMA REMIC Trust, Series 2016-98 I0#~ | 0.96 | % | 05/16/2058 | 437,210 | |||||||
5,775,607 | GNMA REMIC Trust, Series 2016-110 I0#~ | 1.04 | % | 05/16/2058 | 470,008 | |||||||
347,663 | GSMS, Series 2013-GC10 | 2.61 | % | 02/12/2046 | 348,175 | |||||||
847,000 | GSMS, Series 2017-GS6 AS | 3.64 | % | 05/12/2050 | 863,302 | |||||||
1,100,000 | JPMCC, Series 2016-ASH A (1 Month LIBOR USD + 1.50%)^ | 2.98 | % | 10/16/2034 | 1,103,122 | |||||||
630,000 | MAD Mortgage Trust, Series 2017-330M B#^ | 3.37 | % | 08/17/2034 | 634,408 | |||||||
1,100,000 | MSC, Series 2017-PRME B (1 Month LIBOR USD + 1.35%)^ | 2.83 | % | 02/15/2034 | 1,102,957 | |||||||
900,000 | MSC, Series 2017-CLS A (1 Month LIBOR USD + 0.70%)^ | 1.95 | % | 11/15/2034 | 901,121 | |||||||
750,000 | MSC, Series 2017-CLS C (1 Month LIBOR USD + 1.00%)^ | 2.25 | % | 11/15/2034 | 750,579 | |||||||
550,000 | MSC, Series 2017-CLS D (1 Month LIBOR USD + 1.40%)^ | 2.65 | % | 11/15/2034 | 550,787 | |||||||
1,300,000 | WFCM, Series 2017-RB1 AS | 3.76 | % | 03/17/2050 | 1,347,903 | |||||||
Total Mortgage Backed Securities (Cost $335,462,185) | 333,531,667 | |||||||||||
Asset Backed Securities — 17.4% | ||||||||||||
1,117,443 | Aircraft Certificate Owner Trust, Series 2003-1A E^ | 7.00 | % | 09/20/2022 | 1,184,489 | |||||||
375,000 | American Airlines Trust, Series 2017-2 AA | 3.35 | % | 04/15/2031 | 379,474 | |||||||
600,000 | American Credit Acceptance Receivables Trust, Series 2017-3 B^ | 2.25 | % | 01/11/2021 | 598,003 | |||||||
900,000 | American Credit Acceptance Receivables Trust, Series 2017-2 B^ | 2.46 | % | 04/12/2021 | 899,249 | |||||||
338,000 | American Credit Acceptance Receivables Trust, Series 2015-1 C^ | 4.29 | % | 04/12/2021 | 341,378 | |||||||
1,050,000 | American Credit Acceptance Receivables Trust, Series 2017-3 C^ | 2.72 | % | 06/10/2022 | 1,045,327 |
The accompanying notes are an integral part of these financial statements.
70
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par Value | Security Description | Rate | Maturity | Value $ | ||||||||
Asset Backed Securities — 17.4% (Continued) | ||||||||||||
1,950,000 | American Credit Acceptance Receivables Trust, Series 2017-4 C^ | 2.94 | % | 01/10/2024 | 1,950,770 | |||||||
8,266 | AmeriCredit Automobile Receivables Trust, Series 2013-4 C | 2.72 | % | 09/09/2019 | 8,268 | |||||||
419,054 | Bayview Opportunity Master Fund IIIa Trust, Series 2017-RN7 A1ʭ^ | 3.10 | % | 09/28/2032 | 419,262 | |||||||
585,999 | Bayview Opportunity Master Fund IVb Trust, Series 2017-NPL1 A1ʭ^ | 3.60 | % | 01/28/2032 | 588,169 | |||||||
543,959 | BRE Grand Islander Timeshare Issuer LLC, Series 2017-1A A^ | 2.94 | % | 05/25/2029 | 540,807 | |||||||
1,138,147 | Capital Auto Receivables Asset Trust, Series B^ | 2.35 | % | 07/22/2019 | 1,138,662 | |||||||
3,000,000 | Carlyle Global Market Strategies CLO, Ltd., Series 2014-1A BR (3 Month LIBOR USD + 1.80%)^ | 3.15 | % | 04/17/2025 | 3,005,377 | |||||||
930,130 | Continental Airlines Trust, Series 1999-1 A | 6.55 | % | 08/02/2020 | 953,383 | |||||||
679,286 | Continental Airlines Trust, Series 2000-1 A-1 | 8.05 | % | 05/01/2022 | 749,762 | |||||||
635,000 | CPS Auto Receivables Trust, Series 2017-B B^ | 2.33 | % | 05/17/2021 | 633,152 | |||||||
1,100,000 | CPS Auto Receivables Trust, Series 2017-A B^ | 2.68 | % | 05/17/2021 | 1,101,692 | |||||||
1,500,000 | Dell Equipment Finance Trust, Series 2015-2 B^ | 2.21 | % | 09/22/2020 | 1,500,297 | |||||||
895,000 | Drive Auto Receivables Trust, Series 2017-BA B^ | 2.20 | % | 05/15/2020 | 896,677 | |||||||
663,000 | Drive Auto Receivables Trust, Series 2016-A^ | 3.91 | % | 05/17/2021 | 668,038 | |||||||
1,100,000 | Drive Auto Receivables Trust, Series 2017-2 B | 2.25 | % | 06/15/2021 | 1,100,699 | |||||||
1,300,000 | Drive Auto Receivables Trust, Series 2017-AA C^ | 2.98 | % | 01/18/2022 | 1,309,164 | |||||||
600,000 | Drive Auto Receivables Trust, Series 2017-1 | 2.84 | % | 04/15/2022 | 602,887 | |||||||
520,000 | Drive Auto Receivables Trust, Series 2017-2 C | 2.75 | % | 09/15/2023 | 520,953 | |||||||
20,839 | DT Auto Owner Trust, Series 2016-1A B^ | 2.79 | % | 05/15/2020 | 20,845 | |||||||
500,000 | DT Auto Owner Trust, Series 2017-3A C^ | 3.01 | % | 05/15/2023 | 501,018 | |||||||
2,400,000 | DT Auto Owner Trust, Series 2017-4^ | 2.86 | % | 07/17/2023 | 2,401,517 | |||||||
172,383 | Federal Express Corp., Series 1998-1 | 6.72 | % | 07/15/2023 | 186,389 | |||||||
1,750,000 | Highbridge Loan Management, Ltd., Series 4A-2014 B (3 Month LIBOR USD + 3.00%)^ | 4.38 | % | 07/28/2025 | 1,751,994 | |||||||
3,000,000 | Highbridge Loan Management, Ltd., Series 6A-2015 C (3 Month LIBOR USD + 3.07%)^ | 4.46 | % | 05/05/2027 | 3,004,416 | |||||||
141,646 | Hilton Grand Vacations Trust, Series 2013-A A^ | 2.28 | % | 01/25/2026 | 140,691 | |||||||
283,757 | Hilton Grand Vacations Trust, Series 2014-A^ | 1.77 | % | 11/25/2026 | 279,454 | |||||||
831,631 | Hilton Grand Vacations Trust, Series 2017-AA A^ | 2.66 | % | 12/26/2028 | 826,305 | |||||||
900,000 | Invitation Homes Trust, Series 2017-SFR2 B (1 Month LIBOR USD + 1.15%)^ | 2.64 | % | 12/19/2036 | 903,573 | |||||||
600,000 | Invitation Homes Trust, Series 2017-SFR2 C (1 Month LIBOR USD + 1.45%)^ | 2.94 | % | 12/19/2036 | 604,995 | |||||||
1,500,000 | Madison Park Funding XIII, Ltd., Series 2014-13R D-R (3 Month LIBOR USD + 3.27%)^ | 4.63 | % | 01/21/2025 | 1,512,487 | |||||||
750,000 | Magnetite IX, Ltd. (3 Month LIBOR USD + 3.10%)^ | 4.47 | % | 07/25/2026 | 755,748 | |||||||
74,431 | MMAF Equipment Finance LLC, Series 2015-A^ | 1.39 | % | 10/16/2019 | 74,366 | |||||||
27,039 | MMAF Equipment Finance LLC, Series 2013-A^ | 1.68 | % | 05/11/2020 | 27,031 | |||||||
415,122 | MVW Owner Trust, Series 2013-1A A^ | 2.15 | % | 04/22/2030 | 409,951 | |||||||
144,126 | MVW Owner Trust, Series 2014-1^ | 2.25 | % | 09/22/2031 | 142,189 | |||||||
785,564 | MVW Owner Trust, Series 2015-1A A^ | 2.52 | % | 12/20/2032 | 782,080 | |||||||
548,296 | MVW Owner Trust, Series 2016-1A A^ | 2.25 | % | 12/20/2033 | 542,509 | |||||||
288,388 | MVW Owner Trust, Series 2017-1A A^ | 2.42 | % | 12/20/2034 | 286,012 | |||||||
288,388 | MVW Owner Trust, Series 2017-1A B^ | 2.75 | % | 12/20/2034 | 285,411 | |||||||
600,000 | Nationstar HECM Loan Trust, Series 2017-2A M1#^ | 2.82 | % | 09/25/2027 | 601,781 | |||||||
598,858 | Orange Lake Timeshare Trust, Series 2016-A A^ | 2.61 | % | 03/08/2029 | 594,708 | |||||||
278,284 | OSCAR U.S. Funding Trust IV, Series 2016-1A A2B (1 Month LIBOR USD + 1.70%)^ | 2.95 | % | 07/15/2020 | 279,758 | |||||||
164,460 | OSCAR U.S. Funding Trust V, Series 2016-2A A2B (1 Month LIBOR USD + 1.40%)^ | 2.88 | % | 11/15/2019 | 165,068 | |||||||
639,487 | OSCAR U.S. Funding Trust VI LLC, Series 2017-1A A2B (1 Month LIBOR USD + 0.80%)^ | 2.23 | % | 05/11/2020 | 640,537 | |||||||
1,318,448 | OSCAR U.S. Funding Trust VI LLC, Series 2017-6^ | 2.30 | % | 05/11/2020 | 1,318,626 | |||||||
600,000 | OSCAR U.S. Funding Trust VII LLC, Series 2017-2A A2B (1 Month LIBOR USD + 0.65%)^ | 2.08 | % | 11/10/2020 | 600,885 | |||||||
28,490 | Prestige Auto Receivables Trust, Series 2016-1 A-2^ | 1.78 | % | 04/15/2019 | 28,490 | |||||||
723,966 | Prestige Auto Receivables Trust, Series 2014-1A B^ | 1.91 | % | 04/15/2020 | 724,008 | |||||||
254,000 | Prestige Auto Receivables Trust, Series 2016-1 B^ | 2.98 | % | 11/16/2020 | 255,846 | |||||||
285,000 | Prestige Auto Receivables Trust, Series 2015-1 B^ | 2.04 | % | 04/15/2021 | 284,964 | |||||||
2,000,000 | Regatta III Funding, Ltd. (3 Month LIBOR USD + 1.50%)^ | 2.86 | % | 04/15/2026 | 2,002,118 | |||||||
1,200,000 | Santander Drive Auto Receivables Trust, Series 2017-2 C | 2.79 | % | 08/15/2022 | 1,204,442 | |||||||
54,985 | Sierra Timeshare Receivables Funding LLC, Series 2014-1A A^ | 2.07 | % | 03/20/2030 | 54,864 | |||||||
601,192 | Sierra Timeshare Receivables Funding LLC, Series 2014-3A A^ | 2.30 | % | 10/20/2031 | 599,284 | |||||||
387,070 | Sierra Timeshare Receivables Funding LLC, Series 2015-1 A^ | 2.40 | % | 03/20/2032 | 385,726 | |||||||
657,582 | Sierra Timeshare Receivables Funding LLC, Series 2015-2A A^ | 2.43 | % | 06/20/2032 | 654,520 |
The accompanying notes are an integral part of these financial statements.
71
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Par | |||||||||||||
Value/Shares | Security Description | Rate | Maturity | Value $ | |||||||||
Asset Backed Securities — 17.4% (Continued) | |||||||||||||
551,231 | Sierra Timeshare Receivables Funding LLC, Series 2015-3A A^ | 2.58 | % | 09/20/2032 | 551,107 | ||||||||
482,985 | Sierra Timeshare Receivables Funding LLC, Series 2016-2A A^ | 2.33 | % | 07/20/2033 | 479,510 | ||||||||
703,660 | Sierra Timeshare Receivables Funding LLC, Series 2016-3A A^ | 2.43 | % | 10/20/2033 | 700,190 | ||||||||
696,262 | Sierra Timeshare Receivables Funding LLC, Series 2017-1A A^ | 2.91 | % | 03/20/2034 | 697,960 | ||||||||
249,687 | U.S. Airways Pass Through Trust, Series 1999-1 A | 8.36 | % | 07/20/2020 | 254,680 | ||||||||
481,701 | VOLT LIV LLC, Series 2017-NPL1 A1ʭ^ | 3.50 | % | 02/25/2047 | 483,601 | ||||||||
536,646 | VOLT LIX LLC, Series 2017-NPL6 A1ʭ^ | 3.25 | % | 05/28/2047 | 539,329 | ||||||||
520,856 | VOLT LV LLC, Series 2017-NPL2 A1ʭ^ | 3.50 | % | 03/25/2047 | 524,062 | ||||||||
780,743 | VOLT LVI LLC, Series 2017-NPL3 A1ʭ^ | 3.50 | % | 03/25/2047 | 786,042 | ||||||||
358,783 | VOLT LVII LLC, Series 2017-NPL4 A1ʭ^ | 3.38 | % | 04/25/2047 | 361,097 | ||||||||
454,850 | VOLT LVIII LLC, Series 2017-NPL5 A1ʭ^ | 3.38 | % | 05/28/2047 | 456,661 | ||||||||
351,069 | VOLT LXI LLC, Series 2017-NPL8 A1ʭ^ | 3.13 | % | 06/25/2047 | 352,090 | ||||||||
624,797 | VOLT LXII LLC, Series 2017-NPL9 A1ʭ^ | 3.13 | % | 09/25/2047 | 625,977 | ||||||||
600,000 | VOLT LXIII LLC, Series 2017-NPL10ʭ^ | 3.00 | % | 10/25/2047 | 599,779 | ||||||||
392,975 | VOLT XXXVIII LLC, Series 2015-NP12 A1ʭ^ | 3.88 | % | 09/25/2045 | 394,591 | ||||||||
705,000 | Volvo Financial Equipment LLC, Series 2014-1^ | 1.94 | % | 11/15/2021 | 704,949 | ||||||||
728,348 | VSE VOI Mortgage LLC, Series 2016-A A^ | 2.54 | % | 07/20/2033 | 722,205 | ||||||||
107,571 | Welk Resorts LLC, Series 2015-A^ | 2.79 | % | 06/15/2031 | 107,112 | ||||||||
116,211 | Westlake Automobile Receivables Trust, Series 2015-1A C^ | 2.29 | % | 11/16/2020 | 116,225 | ||||||||
335,000 | Westlake Automobile Receivables Trust, Series 2016-1A C^ | 3.29 | % | 09/15/2021 | 336,416 | ||||||||
750,000 | Westlake Automobile Receivables Trust, Series 2016-3A B^ | 2.07 | % | 12/15/2021 | 747,784 | ||||||||
750,000 | Westlake Automobile Receivables Trust, Series 2016-3A C^ | 2.46 | % | 01/18/2022 | 746,321 | ||||||||
786,000 | Westlake Automobile Receivables Trust, Series 2017-1A C^ | 2.70 | % | 10/17/2022 | 786,315 | ||||||||
1,250,000 | Westlake Automobile Receivables Trust, Series 2017-2A C^ | 2.59 | % | 12/15/2022 | 1,241,699 | ||||||||
Total Asset Backed Securities (Cost $61,204,206) | 61,286,247 | ||||||||||||
Municipal Bonds — 2.5% | |||||||||||||
Local Government Housing Agency Bonds — 2.5% | |||||||||||||
1,490,000 | Delaware State Housing Authority | 2.75 | % | 12/01/2041 | 1,454,896 | ||||||||
2,700,000 | District of Columbia# | 3.92 | % | 08/01/2038 | 2,511,945 | ||||||||
1,760,000 | Maryland Community Development Administration | 3.24 | % | 09/01/2048 | 1,764,523 | ||||||||
1,000,000 | Massachusetts Port Authority# | 2.54 | % | 01/01/2031 | 947,730 | ||||||||
620,000 | Missouri Housing Development Commission | 2.65 | % | 11/01/2040 | 604,438 | ||||||||
1,500,000 | New York State Energy Research & Development Authority# | 3.92 | % | 07/01/2029 | 1,500,000 | ||||||||
Total Municipal Bonds (Cost $8,612,997) | 8,783,532 | ||||||||||||
Preferred Stocks — 0.1% | |||||||||||||
15,000 | AGNC Investment Corp., Series B, 7.75% | 387,600 | |||||||||||
Total Preferred Stocks (Cost $383,294) | 387,600 | ||||||||||||
Short-Term Investments — 6.4% | |||||||||||||
Money Market Funds — 6.3% | |||||||||||||
22,210,252 | First American Treasury Obligations Fund — Class Z, 1.18%* | 22,210,252 | |||||||||||
U.S. Treasury Bills — 0.1% | |||||||||||||
300,000 | United States Treasury Bill† | 298,705 | |||||||||||
Total Short-Term Investments (Cost $22,509,163) | 22,508,957 | ||||||||||||
Total Investments — 121.2% (Cost $428,171,845) | 426,498,003 | ||||||||||||
Liabilities in Excess of Other Assets — (21.2)% | (74,534,787 | ) | |||||||||||
NET ASSETS — 100.0% | $ | 351,963,216 |
The accompanying notes are an integral part of these financial statements.
72
Brown Advisory Mortgage Securities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Mortgage Backed Securities | 94.8 | % | ||
Asset Backed Securities | 17.4 | % | ||
Money Market Funds | 6.3 | % | ||
Local Government Housing Agency Bonds | 2.5 | % | ||
Preferred Stocks | 0.1 | % | ||
U.S. Treasury Bills | 0.1 | % | ||
Other Assets and Liabilities | (21.2 | )% | ||
100.0 | % |
# | Variable rate security. Rate disclosed is as of December 31, 2017. | |
ʭ | Step bond; the interest rate shown is the rate in effect as of December 31, 2017. | |
^ | 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, 2017, the value of these securities amounted to $68,500,383 or 19.5% of net assets. | |
~ | Interest Only Security | |
† | This security is pledged as collateral in connection with open futures contracts. | |
* | Annualized seven-day yield as of December 31, 2017. |
Futures Contracts — Long (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury 10-Year Ultra Bond Futures March 2018 | 70 | 03/20/2018 | $ | 9,361,740 | $ | 9,349,375 | $ | (12,365 | ) | ||||||||
U.S. Treasury 5-Year Note Futures March 2018 | 115 | 03/29/2018 | 13,397,137 | 13,358,867 | (38,270 | ) | |||||||||||
U.S. Treasury Long Bond March 2018 | 95 | 03/20/2018 | 14,464,051 | 14,535,000 | 70,949 | ||||||||||||
$ | 37,222,928 | $ | 37,243,242 | $ | 20,314 | ||||||||||||
Futures Contracts — Short (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
U.S. Treasury 2-Year Note Futures March 2018 | (150) | 3/29/18 | $ | (32,108,683 | ) | $ | (32,116,406 | ) | $ | (7,723 | ) |
There is no variation margin due to or from the Fund as of December 31, 2017.
The accompanying notes are an integral part of these financial statements.
73
Brown Advisory – WMC Strategic European Equity Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-months ended December 31, 2017, the Brown Advisory – WMC Strategic European Equity Fund Institutional Shares (the “Fund”) rose 7.99%, while the MSCI Europe Index, the Fund’s benchmark, returned 8.80% 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. This fundamental process leads us to hold certain sector over- and underweights.
Stock selection was positive during the period. Selection within the information technology, financials, industrials and health care sectors contributed most to relative performance. Weak selection within materials and consumer discretionary marginally offset this positive performance. Sector allocation–a residual of the bottom-up stock selection process–largely detracted. The Fund’s underweight to energy and materials and overweight to consumer staples detracted most from relative returns.
Top contributors to relative returns during the period included DSV (industrials), Infineon Technologies (information technology), SuperGroup (consumer discretionary), and United Internet (information technology). The portfolio also benefited from not holding benchmark constituent Nestlé (consumer discretionary).
DSV is a Denmark-based freight logistics company with a large road network across Europe. The company has both a profitable position within European freight and contract logistics as well as exposure to sea and air. DSV has consistently released strong earnings results as they continue to take market share, diversify revenue streams and benefit from improvements in cost control. The company has also seen incremental synergies surrounding the acquisition of U.S. shipping company UTi Worldwide earlier in the year, creating the fourth-largest third-party logistics provider globally. The stock has been a strong contributor to performance throughout this period. Though we have trimmed on strength, we continue to hold a position. We believe DSV is a well-managed company with a strong focus on cost control across all its divisions, profits from an asset light business and will continue to grow while benefiting from pricing economies of scale.
Infineon is a German semiconductor manufacturer and the clear market leader within power semiconductors. The company experienced strong revenue and earnings growth during the period, continued to take market share and benefitted from the momentum behind electric vehicles. Infineon also announced several important partnerships, including supplying Audi with key components for the world’s first production car that allows the driver to temporarily take their hands off the steering wheel under certain conditions. The company also continues to expand its strategic relationships in Silicon Valley, announcing a partnership with the technology company Smart Wires. Despite the strong performance, we added to our position as Infineon is exposed to several key growth areas including electric vehicles, autonomous driving and energy efficiency. Further, the company continues to invest in its business, which could lead to cost advantages and margin expansion.
Top detractors from relative returns included our positions in Elior Group (consumer discretionary), Merck (health care), and Hikma Pharmaceuticals (health care). The portfolio also suffered from not holding benchmark constituent Royal Dutch Shell (energy).
Elior is one of the world’s leading operators in the catering, concessions and services industry. In December, the stock was downgraded after the company reported numbers below expectations, cut its forward earnings guidance and the CEO departed following a change to its corporate governance structure. Despite the recent issues, we have a positive view on contract catering and concessions and believe the company has a sound strategy with a strong market position in Europe. There are opportunities for further growth and margin improvement, and we believe the longer-term prospects are positive. We have added to the position on weakness.
Hikma, a U.K. pharmaceuticals company, continued to fall on the back of the FDA rejection of its generic asthma medication. The company has suffered heavily from accelerating price erosion in its US business due primarily to an increasingly challenging environment in U.S. generics. During November and December, we sold out of our position in Hikma after growing concerns around the barriers to entry for the injectables business could be eroding. As such, we expect pricing pressure in the business to increase going forward. With the competitive environment in injectables intensifying and regulatory risk rising, the investment case no longer fits our process.
We believe that the current environment is one of rising (albeit low) interest rates and improving growth. Central banks will likely remain accommodative; however, with the European Central Bank (ECB) scheduled to start tapering its asset purchases and the U.K. and the U.S. starting to gradually raise rates, the direction of interest rates seems to be up. Large amounts of money are still chasing returns in this environment and the opportunity set is more limited than in the past. Volatility on a single-stock basis
74
Brown Advisory – WMC Strategic European Equity Fund
A Message to Our Shareholders
December 31, 2017
(similar to those seen during the course of 2017) should potentially open up compelling investment opportunities. In line with our philosophy, we remain disciplined around valuations across our holdings, trimming positions where higher valuations and expectations outpace fundamentals.
Looking forward, we will seek, identify and invest in companies that are exposed to structural growth drivers and that we believe have built strong competitive advantages. These intrinsic qualities can help to drive margins and returns, as well as high free cash flow generation, which we believe has the potential to create long-term value.
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.
75
Brown Advisory – WMC Strategic European Equity Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 97.2% | ||||||||
Austria — 0.6% | ||||||||
226,388 | Porr AG | 7,548,447 | ||||||
Belgium — 2.9% | ||||||||
497,300 | UCB S.A. | 39,432,271 | ||||||
Denmark — 3.4% | ||||||||
57,158 | ALK-Abello A/S | 6,816,916 | ||||||
428,600 | DSV A/S | 33,724,747 | ||||||
474,870 | Spar Nord Bank A/S | 5,513,595 | ||||||
46,055,258 | ||||||||
Finland — 5.1% | ||||||||
777,288 | Kone OYJ | 41,742,372 | ||||||
297,413 | Nokian Renkaat OYJ | 13,488,927 | ||||||
247,852 | Sampo OYJ | 13,602,614 | ||||||
68,833,913 | ||||||||
France — 13.9% | ||||||||
734,851 | Altran Technologies S.A. | 12,227,495 | ||||||
115,968 | BioMerieux S.A. | 10,383,049 | ||||||
796,319 | Elior Group S.A. | 16,422,680 | ||||||
1,339,690 | Elis S.A. | 36,812,090 | ||||||
624,881 | Legrand S.A. | 48,040,039 | ||||||
101,089 | L’Oreal S.A. | 22,399,322 | ||||||
218,913 | Pernod Ricard S.A. | 34,622,079 | ||||||
9,504 | Virbac S.A. | 1,408,313 | ||||||
115,556 | Worldline S.A.* | 5,624,279 | ||||||
187,939,346 | ||||||||
Germany — 11.4% | ||||||||
245,489 | Beiersdorf AG | 28,779,364 | ||||||
376,207 | Brenntag AG | 23,717,381 | ||||||
981,036 | Infineon Technologies AG | 26,717,666 | ||||||
370,335 | Merck KGaA | 39,750,469 | ||||||
409,107 | United Internet AG | 28,032,409 | ||||||
78,903 | Washtec AG | 7,427,265 | ||||||
154,424,554 | ||||||||
Italy — 1.0% | ||||||||
66,169 | DiaSorin S.p.A. | 5,867,544 | ||||||
1,138,741 | OVS S.p.A. | 7,582,222 | ||||||
13,449,766 | ||||||||
Netherlands — 8.0% | ||||||||
411,527 | Heineken NV | 42,900,440 | ||||||
1,726,090 | ING Groep NV | 31,685,287 | ||||||
600,278 | Unilever NV | 33,797,352 | ||||||
108,383,079 | ||||||||
Spain — 1.0% | ||||||||
209,760 | Viscofan S.A. | 13,831,095 | ||||||
Sweden — 9.6% | ||||||||
1,961,360 | Assa Abloy AB | 40,661,863 | ||||||
801,588 | Atlas Copco AB | 34,593,394 | ||||||
2,281,603 | Cloetta AB | 8,247,068 | ||||||
1,300,032 | Sandvik AB | 22,756,663 | ||||||
1,070,217 | Trelleborg AB | 24,767,436 | ||||||
131,026,424 | ||||||||
Switzerland — 14.7% | ||||||||
1,261 | BELIMO Holding AG | 5,512,437 | ||||||
241,442 | Cie Financiere Richemont S.A. | 21,866,888 | ||||||
28,388 | Daetwyler Holding AG | 5,486,776 | ||||||
56,056 | Geberit AG | 24,673,973 | ||||||
9,737 | INFICON Holding AG* | 6,067,414 | ||||||
668,626 | Julius Baer Group, Ltd. | 40,887,861 | ||||||
99,075 | Kuehne & Nagel International AG | 17,528,282 | ||||||
3,646 | LEM Holding S.A. | 6,181,120 | ||||||
46,154 | Tecan Group AG | 9,585,542 | ||||||
3,370,830 | UBS Group AG* | 61,931,444 | ||||||
199,721,737 | ||||||||
United Kingdom — 25.6% | ||||||||
374,370 | British American Tobacco PLC | 25,306,905 | ||||||
1,711,230 | Compass Group PLC | 36,897,826 | ||||||
374,489 | Diploma PLC | 6,305,022 | ||||||
2,929,973 | Electrocomponents PLC | 24,733,678 | ||||||
778,267 | Halma PLC | 13,223,626 | ||||||
1,126,388 | Jardine Lloyd Thompson Group PLC | 21,154,183 | ||||||
1,332,182 | Prudential PLC | 34,117,532 | ||||||
626,387 | Reckitt Benckiser Group PLC | 58,437,697 | ||||||
4,086,799 | Rentokil Initial PLC | 17,508,479 | ||||||
2,235,143 | Smith & Nephew PLC | 38,674,854 | ||||||
234,366 | Spirax-Sarco Engineering PLC | 17,719,132 | ||||||
977,019 | SSP Group PLC | 8,973,611 | ||||||
547,621 | SuperGroup PLC | 14,617,324 | ||||||
1,636,601 | UBM PLC | 16,476,941 | ||||||
417,296 | WH Smith PLC | 13,217,650 | ||||||
347,364,460 | ||||||||
Total Common Stocks (Cost $1,047,711,751) | 1,318,010,350 | |||||||
Preferred Stocks — 0.7% | ||||||||
Germany — 0.7% | ||||||||
144,891 | Fuchs Petrolub SE | 7,672,075 | ||||||
14,605 | Sartorius AG | 1,387,359 | ||||||
Total Preferred Stocks (Cost $7,959,762) | 9,059,434 | |||||||
Short-Term Investments — 1.9% | ||||||||
Money Market Funds — 1.9% | ||||||||
25,376,570 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 25,376,570 | |||||||
Total Short-Term Investments (Cost $25,376,570) | 25,376,570 | |||||||
Total Investments — 99.8% (Cost $1,081,048,083) | 1,352,446,354 | |||||||
Other Assets in Excess of Liabilities — 0.2% | 3,146,147 | |||||||
NET ASSETS — 100.0% | $ | 1,355,592,501 |
The accompanying notes are an integral part of these financial statements.
76
Brown Advisory – WMC Strategic European Equity Fund
Schedule of Investments
December 31, 2017 (Unaudited)
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
United Kingdom | 25.6 | % | ||
Switzerland | 14.7 | % | ||
France | 13.9 | % | ||
Germany | 12.1 | % | ||
Sweden | 9.6 | % | ||
Netherlands | 8.0 | % | ||
Finland | 5.1 | % | ||
Denmark | 3.4 | % | ||
Belgium | 2.9 | % | ||
Money Market Funds | 1.9 | % | ||
Spain | 1.0 | % | ||
Italy | 1.0 | % | ||
Austria | 0.6 | % | ||
Other Assets and Liabilities | 0.2 | % | ||
100.0 | % |
* | Non-Income Producing | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
77
Brown Advisory – WMC Japan Alpha Opportunities Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
For the six-months ended December 31, 2017, the Brown Advisory – WMC Japan Alpha Opportunities Fund Institutional Shares (the “Fund”) increased 14.12% in value. During the same period, the TOPIX Total Return Index, the Fund’s benchmark, increased 13.35%.
Stock prices soared during the period, driven in part by an accelerating manufacturing sector. The Bank of Japan’s (BOJ) Tankan Survey reached an 11-year high, indicating robust activity at Japan’s large manufacturers. Economic activity and business sentiment exceeded consensus estimates, even as inflation remained lackluster. Exports also were strong, accelerating to over 16% year-over-year growth in December.
For the period, security selection and sector allocation both contributed to relative outperformance. Stock selection was strongest in the industrials, health care and financials sectors. Selection in the information technology, energy and consumer staples sectors only partially offset these returns. Sector allocations are a residual of our bottom-up stock selection approach.
From an individual stock perspective, top contributors to relative performance during the period included Japan Steel Works (industrials), Alpine Electronics (consumer discretionary) and Kyoritsu Maintenance (consumer discretionary). Japan Steel Works operates two main business lines: steel and energy products, and industrial machinery. Strong demand for plastic products from the auto sector and better-than-expected operating leverage in its machinery business elevated earnings forecasts the last couple of quarters. Alpine Electronics develops, manufactures, and sells audio and navigation products for automobiles. The stock rose as Alps Electric announced it would fully acquire Alpine Electronics at a 30% premium through a share swap. We sold the position during the period and maintain exposure to Alps Electric.
Top detractors from relative performance included Fujitsu (information technology), Ezaki Glico (consumer staples) and our decision not to hold strong-performing benchmark constituent Toyota Motor (industrials). Fujitsu is the largest IT service company in Japan. The stock price fell following the announcement of soft second quarter earnings results. Ezaki Glico manufactures and sells grocery goods. Shares of Ezaki Glico fell on lowered guidance amid weak performance in its China operation.
During the period, we initiated new positions in Sumitomo Electric Industries (consumer discretionary), Shin-Etsu Chemical (materials) and Acom (financials). We eliminated positions in Daicel (materials) and Toray Industries (materials).
Economic data in Japan has continued to show positive signs: strong consumer and business sentiment, tightening labor market, record highs in export volumes and a robust near-term outlook for exports. Within a global context, Japanese equities have remained cheap. Contributing to the attractive opportunity set are corporate reforms and an increased focus on governance, which have resulted in improving fundamentals.
From a factor perspective, we continue to favor value and growth over safety and low volatility factors in light of our outlook for continued late cycle economic growth. Factor breadth remains wide in Japan. This is a good signal for active managers, and we believe equity factors (as opposed to macro factors) and corporate fundamentals should continue to drive returns into 2018.
The Fund used index futures during the period to manage cash flows; we do not believe this to be a material driver of performance over time.
Sincerely,
Kent M. Stahl, CFA
Portfolio Manager
Gregg R. Thomas, CFA
Portfolio Manager
78
Brown Advisory – WMC Japan Alpha Opportunities Fund
A Message to Our Shareholders
December 31, 2017
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. Investments focused in a single geographic region may be exposed to greater risk than investments diversified among various geographies. Investments in foreign securities entail certain risks not associated with investments in domestic securities, such as volatility of currency exchange rates, and in some cases, political and economic instability and relatively illiquid markets. These risks are greater in emerging markets. Investments in smaller and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. The value of investments in REITs may change in response to changes in the real estate market such as declines in the value of real estate, lack of available capital or financing opportunities, and increases in property taxes or operating costs. Derivatives involve risks different from, and in certain cases, greater than the risks presented by more traditional investments. Investors will indirectly bear the principal risks and its share of the fees and expenses of the Fund’s investment in other Investment Companies. Earnings growth is not representative of the fund’s future performance.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
79
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 95.3% | ||||||||
Japan — 95.3% | ||||||||
Consumer Discretionary — 24.3% | ||||||||
52,700 | Adastria Co., Ltd. | 1,064,759 | ||||||
224,900 | Aisan Industry Co., Ltd. | 2,632,698 | ||||||
79,274 | Altech Corp. | 1,559,505 | ||||||
98,150 | Askul Corp. | 2,777,939 | ||||||
292,800 | Avex Group Holdings, Inc. | 4,159,999 | ||||||
39,400 | BELC Co., Ltd. | 2,371,425 | ||||||
89,800 | Benesse Holdings, Inc. | 3,159,511 | ||||||
339,762 | Capcom Co., Ltd. | 10,744,921 | ||||||
242,600 | DaikyoNishikawa Corp. | 3,922,743 | ||||||
110,200 | DIP Corp. | 2,840,391 | ||||||
176,500 | Exedy Corp. | 5,437,771 | ||||||
272,645 | Fuji Media Holdings, Inc. | 4,279,435 | ||||||
136,617 | FUJIFILM Holdings Corp. | 5,574,652 | ||||||
355,200 | Funai Electric Co., Ltd. | 2,741,742 | ||||||
78,700 | Gendai Agency, Inc. | 384,158 | ||||||
193,200 | H2O Retailing Corp. | 4,038,762 | ||||||
602,400 | Honda Motor Co., Ltd. | 20,558,407 | ||||||
133,620 | Honeys Holdings Co., Ltd. | 1,398,899 | ||||||
397,800 | IDOM, Inc. | 2,816,325 | ||||||
10,400 | IJT Technology Holdings Co. Ltd. | 90,881 | ||||||
261,700 | ITOCHU Corp. | 4,878,486 | ||||||
123,300 | JAC Recruitment Co., Ltd. | 2,389,114 | ||||||
131,000 | Katitas Co., Ltd.* | 3,006,576 | ||||||
328,900 | Keihin Corp. | 6,679,825 | ||||||
312,679 | Kyoritsu Maintenance Co., Ltd. | 12,612,693 | ||||||
1,036,710 | Mitsubishi Motors Corp. | 7,458,187 | ||||||
584,716 | NGK Spark Plug Co., Ltd. | 14,171,959 | ||||||
252,700 | Nikon Corp. | 5,085,136 | ||||||
597,215 | Nippon Television Holdings, Inc. | 10,217,532 | ||||||
203,000 | Nishimatsuya Chain Co., Ltd. | 2,254,973 | ||||||
282,900 | Nissin Kogyo Co., Ltd. | 5,599,229 | ||||||
149,089 | Pacific Industrial Co., Ltd. | 2,312,701 | ||||||
95,700 | PAL Group Holdings Co., Ltd. | 3,001,041 | ||||||
103,700 | Persol Holdings Co., Ltd. | 2,596,272 | ||||||
4,414,606 | Pioneer Corp.* | 8,918,651 | ||||||
197,100 | Prestige International, Inc. | 2,510,656 | ||||||
53,200 | Proto Corp. | 762,919 | ||||||
231,800 | Relia, Inc. | 2,704,156 | ||||||
177,620 | Sankyo Co., Ltd. | 5,585,575 | ||||||
142,500 | Sanyo Shokai, Ltd. | 2,811,817 | ||||||
133,566 | Seiren Co., Ltd. | 2,610,527 | ||||||
413,120 | Showa Corp. | 5,117,315 | ||||||
26,000 | Sohgo Security Services Co., Ltd. | 1,413,115 | ||||||
39,700 | Strike Co., Ltd. | 1,841,296 | ||||||
126,260 | TechnoPro Holdings, Inc. | 6,845,217 | ||||||
40,800 | Tenma Corp. | 800,256 | ||||||
365,700 | Tokai Rika Co., Ltd. | 7,673,835 | ||||||
329,700 | Toppan Forms Co., Ltd. | 3,725,450 | ||||||
132,800 | Toppan Printing Co., Ltd. | 1,199,599 | ||||||
911,382 | Toyo Tire & Rubber Co., Ltd. | 18,729,158 | ||||||
268,000 | Toyoda Gosei Co., Ltd. | 6,799,641 | ||||||
99,598 | Toyota Industries Corp. | 6,384,129 | ||||||
132,700 | Trusco Nakayama Corp. | 3,864,943 | ||||||
122,960 | TV Asahi Holdings Corp. | 2,466,535 | ||||||
80,000 | United Arrows, Ltd. | 3,244,452 | ||||||
238,200 | XEBIO Holdings Co., Ltd. | 4,526,259 | ||||||
265,354,148 | ||||||||
Consumer Staples — 4.5% | ||||||||
14,600 | Ain Holdings, Inc. | 872,192 | ||||||
418,281 | Ajinomoto Co., Inc. | 7,869,633 | ||||||
74,400 | Cawachi, Ltd. | 1,835,034 | ||||||
43,900 | Ci:z Holdings Co., Ltd. | 2,238,396 | ||||||
39,488 | Cocokara Fine, Inc. | 2,543,932 | ||||||
298,020 | Ezaki Glico Co., Ltd. | 14,864,965 | ||||||
439,000 | Itoham Yonekyu Holdings, Inc. | 4,012,944 | ||||||
83,320 | Matsumotokiyoshi Holdings Co., Ltd. | 3,422,875 | ||||||
22,500 | Morinaga & Co., Ltd. | 1,138,877 | ||||||
205,561 | Seven & I Holdings Co., Ltd. | 8,515,654 | ||||||
54,300 | Warabeya Nichiyo Holdings Co., Ltd. | 1,537,451 | ||||||
48,851,953 | ||||||||
Energy — 1.4% | ||||||||
747,100 | Inpex Corp. | 9,298,422 | ||||||
239,100 | Japan Petroleum Exploration Co., Ltd. | 6,320,165 | ||||||
15,618,587 | ||||||||
Financials — 16.7% | ||||||||
2,723,105 | Acom Co., Ltd.* | 11,441,079 | ||||||
66,127 | Bank of Kyoto, Ltd. | 3,434,162 | ||||||
183,000 | Chiba Bank, Ltd. | 1,517,575 | ||||||
62,800 | Chugoku Bank, Ltd. | 836,962 | ||||||
286,400 | Concordia Financial Group, Ltd. | 1,722,544 | ||||||
650,400 | Dai-ichi Life Holdings Co., Inc. | 13,367,115 | ||||||
233,000 | Fukuoka Financial Group, Inc. | 1,303,799 | ||||||
151,800 | Hachijuni Bank, Ltd. | 867,434 | ||||||
103,900 | Hiroshima Bank, Ltd. | 901,459 | ||||||
315,900 | Ichiyoshi Securities Co., Ltd. | 3,594,404 | ||||||
106,700 | Japan Post Bank Co., Ltd. | 1,385,792 | ||||||
219,500 | Japan Post Holdings Co., Ltd. | 2,514,134 | ||||||
140,600 | Kyushu Financial Group, Inc. | 847,438 | ||||||
297,200 | Mebuki Financial Group, Inc.* | 1,255,537 | ||||||
6,022,033 | Mitsubishi UFJ Financial Group, Inc. | 43,828,146 | ||||||
10,551,000 | Mizuho Financial Group, Inc. | 19,077,155 | ||||||
385,200 | Resona Holdings, Inc. | 2,295,319 | ||||||
229,600 | San-In Godo Bank, Ltd. | 2,210,511 | ||||||
119,600 | Shinsei Bank, Ltd. | 2,061,037 | ||||||
138,000 | Shizuoka Bank, Ltd. | 1,420,555 | ||||||
537,200 | Sumitomo Mitsui Financial Group, Inc. | 23,155,744 | ||||||
304,460 | Sumitomo Mitsui Trust Holdings, Inc. | 12,046,267 | ||||||
770,000 | T&D Holdings, Inc. | 13,136,579 | ||||||
468,000 | Tochigi Bank, Ltd. | 1,880,570 | ||||||
172,865 | Tokio Marine Holdings, Inc. | 7,862,428 | ||||||
99,430 | Tokyo TY Financial Group, Inc. | 2,871,650 | ||||||
75,000 | Yamaguchi Financial Group, Inc. | 888,853 | ||||||
122,300 | Zenkoku Hosho Co., Ltd. | 5,253,670 | ||||||
182,977,918 | ||||||||
Health Care — 5.5% | ||||||||
159,600 | Asahi Intecc Co., Ltd. | 5,469,996 | ||||||
108,800 | CMIC Holdings Co., Ltd. | 1,944,003 | ||||||
111,900 | Eisai Co., Ltd. | 6,356,996 |
The accompanying notes are an integral part of these financial statements.
80
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 95.3% (Continued) | ||||||||
Japan — 95.3% (Continued) | ||||||||
Health Care — 5.5% (Continued) | ||||||||
130,400 | EPS Holdings, Inc. | 2,945,342 | ||||||
89,500 | Nippon Shinyaku Co., Ltd. | 6,657,440 | ||||||
502,800 | Nipro Corp. | 7,430,965 | ||||||
139,300 | ONO Pharmaceutical Co., Ltd. | 3,240,357 | ||||||
45,000 | PeptiDream, Inc.* | 1,535,042 | ||||||
63,529 | SMS Co., Ltd. | 1,996,901 | ||||||
144,540 | Suzuken Co., Ltd. | 5,934,286 | ||||||
300,300 | Takeda Pharmaceutical Co., Ltd. | 17,002,290 | ||||||
60,513,618 | ||||||||
Industrials — 13.3% | ||||||||
678,600 | Chiyoda Corp. | 4,987,895 | ||||||
22,224 | Daifuku Co., Ltd. | 1,207,445 | ||||||
90,700 | Daiseki Co., Ltd. | 2,521,752 | ||||||
261,100 | DMG Mori Co., Ltd. | 5,375,393 | ||||||
499,526 | Hazama Ando Corp. | 3,903,949 | ||||||
461,995 | Hino Motors, Ltd. | 5,967,296 | ||||||
140,900 | Hisaka Works, Ltd. | 1,495,151 | ||||||
219,830 | Hitachi Metals, Ltd. | 3,144,125 | ||||||
193,600 | Hosiden Corp. | 2,848,200 | ||||||
130,400 | IHI Corp. | 4,324,902 | ||||||
125,500 | Jamco Corp. | 2,951,823 | ||||||
189,400 | Japan Steel Works, Ltd. | 6,084,695 | ||||||
327,600 | JGC Corp. | 6,329,046 | ||||||
113,242 | Kawasaki Heavy Industries, Ltd. | 3,961,731 | ||||||
135,500 | Kyudenko Corp. | 6,543,175 | ||||||
301,200 | Mitsubishi Heavy Industries, Ltd. | 11,229,964 | ||||||
36,600 | Mitsui O.S.K. Lines, Ltd. | 1,216,371 | ||||||
570,375 | NGK Insulators, Ltd. | 10,744,182 | ||||||
397,293 | Nippon Yusen K.K. | 9,666,784 | ||||||
382,800 | Sanwa Holdings Corp. | 5,260,620 | ||||||
44,568 | SHO-BOND Holdings Co., Ltd. | 3,172,219 | ||||||
123,300 | Sodick Co., Ltd. | 1,597,430 | ||||||
918,784 | Sumitomo Electric Industries, Ltd. | 15,488,218 | ||||||
209,100 | Tadano, Ltd. | 3,456,351 | ||||||
347,000 | Tokai Carbon Co., Ltd. | 4,281,636 | ||||||
691,000 | Toshiba Machine Co., Ltd. | 5,137,986 | ||||||
276,500 | Toyo Engineering Corp. | 3,186,936 | ||||||
183,180 | Tsubaki Nakashima Co., Ltd. | 4,353,778 | ||||||
357,300 | Ushio, Inc. | 5,096,658 | ||||||
145,535,711 | ||||||||
Information Technology — 14.1% | ||||||||
27,206 | Alpha Systems, Inc. | 592,388 | ||||||
683,178 | Alps Electric Co., Ltd. | 19,433,255 | ||||||
257,500 | Canon, Inc. | 9,593,960 | ||||||
724,100 | Citizen Watch Co., Ltd. | 5,303,662 | ||||||
54,000 | Cresco, Ltd. | 2,235,445 | ||||||
669,456 | DeNA Co., Ltd. | 13,782,139 | ||||||
57,100 | Enplas Corp. | 2,364,696 | ||||||
342,847 | Ferrotec Holdings Corp. | 6,958,323 | ||||||
3,375,739 | Fujitsu, Ltd. | 23,932,412 | ||||||
533,900 | GREE, Inc. | 3,346,549 | ||||||
148,800 | Hitachi High-Technologies Corp. | 6,253,976 | ||||||
175,900 | LAC Co., Ltd. | 2,530,558 | ||||||
70,120 | Melco Holdings, Inc. | 2,406,857 | ||||||
125,500 | Micronics Japan Co., Ltd. | 1,291,181 | ||||||
80,400 | Miraial Co., Ltd. | 1,332,040 | ||||||
391,400 | Nichicon Corp. | 5,105,225 | ||||||
144,400 | Nippon Ceramic Co., Ltd. | 3,700,967 | ||||||
131,700 | Outsourcing, Inc. | 2,394,157 | ||||||
156,700 | Ricoh Co., Ltd. | 1,452,110 | ||||||
190,884 | SCSK Corp. | 8,785,787 | ||||||
616,800 | Shinko Electric Industries Co., Ltd. | 4,983,563 | ||||||
100,200 | SIIX Corp. | 4,292,752 | ||||||
145,000 | SMK Corp. | 816,444 | ||||||
54,600 | Systena Corp. | 1,741,868 | ||||||
67,400 | TechMatrix Corp. | 1,181,109 | ||||||
221,560 | Tokyo Seimitsu Co., Ltd. | 8,718,785 | ||||||
43,100 | UT Group Co., Ltd. | 1,247,646 | ||||||
56,000 | W-Scope Corp. | 1,157,175 | ||||||
994,923 | Yahoo! Japan Corp. | 4,558,231 | ||||||
158,100 | Yume No Machi Souzou Iinkai Co., Ltd. | 2,894,700 | ||||||
154,387,960 | ||||||||
Materials — 10.8% | ||||||||
144,700 | Chubu Steel Plate Co., Ltd. | 1,072,327 | ||||||
116,400 | Denka Co., Ltd. | 4,644,838 | ||||||
109,779 | DIC Corp. | 4,129,969 | ||||||
419,740 | JFE Holdings, Inc. | 10,030,705 | ||||||
501,980 | JSR Corp. | 9,861,032 | ||||||
329,019 | Kanto Denka Kogyo Co., Ltd. | 3,980,922 | ||||||
158,400 | KH Neochem Co., Ltd. | 4,052,089 | ||||||
492,801 | Kobe Steel, Ltd. | 4,547,891 | ||||||
236,100 | Kyoei Steel, Ltd. | 4,494,775 | ||||||
296,033 | MINEBEA MITSUMI, Inc. | 6,174,411 | ||||||
25,746 | Mitsubishi Materials Corp. | 913,609 | ||||||
327,600 | Nakayama Steel Works, Ltd. | 2,105,211 | ||||||
165,900 | Neturen Co., Ltd. | 1,814,493 | ||||||
62,400 | Nippon Shokubai Co., Ltd. | 4,206,397 | ||||||
306,300 | NOK Corp. | 7,127,743 | ||||||
128,700 | Pacific Metals Co., Ltd.* | 3,563,738 | ||||||
89,977 | Shin-etsu Chemical Co., Ltd. | 9,116,740 | ||||||
423,776 | Sumitomo Chemical Co., Ltd. | 3,032,392 | ||||||
295,700 | Sumitomo Riko Co., Ltd. | 3,155,433 | ||||||
107,000 | Taiheiyo Cement Corp. | 4,606,747 | ||||||
66,000 | Tocalo Co., Ltd. | 2,933,801 | ||||||
90,100 | Tokyo Ohka Kogyo Co., Ltd. | 3,878,357 | ||||||
1,001,500 | Tokyo Steel Manufacturing Co., Ltd. | 8,973,947 | ||||||
56,700 | Toyo Seikan Group Holdings, Ltd. | 910,165 | ||||||
71,200 | UACJ Corp. | 1,856,298 | ||||||
218,410 | Yamato Kogyo Co., Ltd. | 6,326,318 | ||||||
117,510,348 | ||||||||
Real Estate — 2.2% | ||||||||
1,484,200 | Ichigo, Inc. | 5,607,800 | ||||||
442,200 | Kenedix, Inc. | 2,697,957 | ||||||
330,400 | Mitsubishi Estate Co., Ltd. | 5,736,749 | ||||||
394,000 | Sekisui House, Ltd. | 7,107,235 | ||||||
627,600 | Takara Leben Co., Ltd. | 2,769,120 | ||||||
23,918,861 |
The accompanying notes are an integral part of these financial statements.
81
Brown Advisory – WMC Japan Alpha Opportunities Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 95.3% (Continued) | ||||||||
Japan — 95.3% (Continued) | ||||||||
Telecommunication Services — 1.8% | ||||||||
291,129 | Nippon Telegraph & Telephone Corp. | 13,687,171 | ||||||
71,600 | SoftBank Group Corp. | 5,668,613 | ||||||
19,355,784 | ||||||||
Utilities — 0.7% | ||||||||
133,600 | Chubu Electric Power Co, Inc. | 1,657,135 | ||||||
92,800 | Chugoku Electric Power Co., Inc. | 996,229 | ||||||
45,000 | Electric Power Development Co., Ltd. | 1,210,482 | ||||||
77,100 | Nippon Gas Co., Ltd. | 2,795,906 | ||||||
350,900 | Tokyo Electric Power Co. Holdings, Inc.* | 1,384,888 | ||||||
8,044,640 | ||||||||
Total Common Stocks (Cost $798,625,263) | 1,042,069,528 | |||||||
Real Estate Investment Trusts — 0.1% | ||||||||
Japan — 0.1% | ||||||||
221 | Hoshino Resorts, Inc. | 1,072,881 | ||||||
Total Real Estate Investment Trusts (Cost $1,171,822) | 1,072,881 | |||||||
Short-Term Investments — 4.5% | ||||||||
Money Market Funds — 4.5% | ||||||||
49,598,493 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 49,598,493 | |||||||
Total Short-Term Investments (Cost $49,598,493) | 49,598,493 | |||||||
Total Investments — 99.9% (Cost $849,395,578) | 1,092,740,902 | |||||||
Other Assets in Excess of Liabilities — 0.1% | 962,970 | |||||||
NET ASSETS — 100.0% | $ | 1,093,703,872 |
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
Consumer Discretionary | 24.3 | % | ||
Financials | 16.7 | % | ||
Information Technology | 14.1 | % | ||
Industrials | 13.3 | % | ||
Materials | 10.8 | % | ||
Health Care | 5.5 | % | ||
Money Market Funds | 4.5 | % | ||
Consumer Staples | 4.5 | % | ||
Real Estate | 2.2 | % | ||
Telecommunication Services | 1.8 | % | ||
Energy | 1.4 | % | ||
Utilities | 0.7 | % | ||
Real Estate Investment Trusts | 0.1 | % | ||
Other Assets and Liabilities | 0.1 | % | ||
100.0 | % |
* | Non-Income Producing | |
# | Annualized seven-day yield as of December 31, 2017. |
Futures Contracts — Long (Note 6) | |||||||||||||||||
Notional | Notional | Unrealized Appreciation | |||||||||||||||
Issue | Contracts | Expiration Date | Amount | Value | (Depreciation) | ||||||||||||
TOPIX Index Futures Contracts^ | 205 | 3/8/18 | $ | 32,311,366 | $ | 33,058,354 | $ | 746,988 |
^ | 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, 2017. |
There is $59,158 of variation margin due from the Fund to the broker as of December 31, 2017.
The accompanying notes are an integral part of these financial statements.
82
Brown Advisory – Somerset Emerging Markets Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory – Somerset Emerging Markets Fund Institutional Shares (the “Fund”) returned 11.59% in value. During the same period, the MSCI Emerging Markets Index, the Fund’s benchmark, returned 15.92%, resulting in relative underperformance of the Fund of 4.33%.
For the six months ended December 31, 2017, a large part of the underperformance came from the Fund’s continued underweight to Chinese internet technology names, which performed strongly relative to our holdings in Korean and Taiwanese technology hardware. The Fund remains underweight this area due to the Fund’s quality bias. We remain cautious on the valuation risks associated with unproven businesses trading on over 40x earnings and on the governance risk associated with Variable Interest Entity corporate structures which underpin the Chinese securities. Despite the relative performance, we are content with the risk or valuation-adjusted returns over the period and expect to pick this up through strong capital protection over a market cycle.
From an individual stock perspective, the key contributors during the period were Win Semiconductors and SK Hynix. As the key supplier of 3D imaging technology in Apple’s iPhone X, Win Semiconductors experienced surging profits throughout 2017. SK Hynix was the beneficiary of rising prices for both DRAM and NAND chips during the period. The primary detractor was Union National Bank, which was hurt by slow regional economic growth across the Persian Gulf and tightening liquidity across its sector.
We made four buys during the second half of 2017, which along with trims and additions brought portfolio turnover to 3.65% on an NAV basis. The Fund bought Sberbank (Russia), Alpha Bank (Greece), Henderson Land Development (Hong Kong) and petroleum trading and distribution company Akr Corporindo (Indonesia). In particular, we initiated our position in Sberbank based on its dominant position in the Russian banking sector, cheap valuation and a strong macroeconomic environment (namely a banking sector oversupplied with liquidity and supported by a disciplined Russian Central Bank).
This year, like last year, we reiterate our view that emerging markets are in a long-term bull market which started at the beginning of 2016. There are three factors driving this: 1) emerging markets remain cheap by historical standards, with the main MSCI emerging markets benchmark still below the high watermark set in 2007; 2) a new global trade and capital cycle started in 2016 with the votes for Brexit and Donald Trump. We expect global trade growth to be faster-than-expected for the next three or four years; and 3) returns on capital across a number of industries and countries have begun to bottom out after having suffered from over-investment through the last bull market phase.
In terms of portfolio positioning, we expect large weightings in financials, technology and consumer stocks to give us a strong, but balanced, exposure to growth drivers in the emerging market economies. We now also have more cyclical exposure in the portfolio than at any time since the inception of the Fund (in oil and gas and Russia) and we are looking at other cyclical and value areas of the market for more exposure.
Sincerely,
Edward Lam
Lead Portfolio Manager
Edward Robertson
Portfolio Manager
Past performance is not a guarantee of future results.
Mutual fund investing involves risk. Principal loss is possible. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. The Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks are greater in emerging markets. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. The Fund invests in smaller and medium-sized companies which carry greater risk than is associated with larger companies for various reasons, such as narrower markets, limited financial resources and less liquid stock.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
83
Brown Advisory – Somerset Emerging Markets Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 95.9% | ||||||||
Brazil — 5.1% | ||||||||
1,890,571 | Ambev S.A. | 12,134,542 | ||||||
2,060,856 | Porto Seguro S.A.† | 22,570,702 | ||||||
34,705,244 | ||||||||
Chile — 4.7% | ||||||||
3,221,349 | AFP Habitat S.A.† | 4,910,019 | ||||||
8,604,446 | Aguas Andinas S.A. | 5,696,216 | ||||||
1,247,316 | Cia Cervecerias Unidas S.A.† | 18,702,646 | ||||||
1,399,468 | Inversiones Aguas Metropolitanas S.A. | 2,655,896 | ||||||
31,964,777 | ||||||||
China — 3.7% | ||||||||
242,500 | China Mobile, Ltd. | 2,452,171 | ||||||
5,581,216 | CNOOC, Ltd. | 8,012,489 | ||||||
924,359 | Henderson Land Development Co., Ltd. | 6,077,664 | ||||||
792,000 | Hengan International Group Co., Ltd. | 8,769,015 | ||||||
25,311,339 | ||||||||
Greece — 0.5% | ||||||||
1,546,412 | Alpha Bank AE* | 3,315,523 | ||||||
Hungary — 8.6% | ||||||||
1,948,488 | MOL Hungarian Oil & Gas PLC† | 22,591,441 | ||||||
864,003 | OTP Bank PLC† | 35,684,212 | ||||||
58,275,653 | ||||||||
India — 9.4% | ||||||||
412,194 | Axis Bank, Ltd. | 3,636,598 | ||||||
1,572,168 | HCL Technologies, Ltd. | 21,934,364 | ||||||
175,577 | Hero MotoCorp, Ltd. | 10,399,703 | ||||||
2,642,281 | Power Grid Corp. of India, Ltd. | 8,280,350 | ||||||
211,978 | Shriram Transport Finance Co., Ltd. | 4,913,688 | ||||||
3,032,933 | Yes Bank, Ltd. | 14,942,559 | ||||||
64,107,262 | ||||||||
Indonesia — 2.9% | ||||||||
6,534,100 | AKR Corporindo Tbk PT | 3,058,156 | ||||||
49,751,983 | Telekomunikasi Indonesia Persero Tbk PT | 16,283,501 | ||||||
19,341,657 | ||||||||
Nigeria — 0.7% | ||||||||
160,191,125 | Access Bank PLC† | 4,649,992 | ||||||
Philippines — 1.8% | ||||||||
14,964,680 | Aboitiz Power Corp.† | 12,444,342 | ||||||
Poland — 3.5% | ||||||||
780,262 | Eurocash S.A. | 5,933,304 | ||||||
1,498,765 | Powszechny Zaklad Ubezpieczen S.A. | 18,128,570 | ||||||
24,061,874 | ||||||||
Portugal — 1.2% | ||||||||
403,599 | Jeronimo Martins SGPS S.A. | 7,837,999 | ||||||
Russia — 1.5% | ||||||||
591,934 | Sberbank of Russia PJSC ADR | 10,006,142 | ||||||
South Africa — 5.3% | ||||||||
3,036,292 | Sanlam, Ltd. | 21,279,769 | ||||||
837,855 | Shoprite Holdings, Ltd. | 14,976,931 | ||||||
36,256,700 | ||||||||
South Korea — 20.0% | ||||||||
121,230 | KT&G Corp. | 13,062,114 | ||||||
3,889 | NCSoft Corp. | 1,622,899 | ||||||
839,940 | Nexen Tire Corp.† | 9,264,665 | ||||||
51,279 | NongShim Co., Ltd.† | 16,960,488 | ||||||
12,226 | Samsung Electronics Co., Ltd. | 29,047,891 | ||||||
84,235 | Samsung Fire & Marine Insurance Co., Ltd. | 21,003,383 | ||||||
634,572 | SK Hynix, Inc. | 45,071,324 | ||||||
136,032,764 | ||||||||
Taiwan — 10.2% | ||||||||
708,000 | eMemory Technology, Inc.† | 10,158,980 | ||||||
872,400 | Formosa International Hotels Corp.† | 4,514,663 | ||||||
8,939,000 | Pou Chen Corp.† | 11,553,524 | ||||||
869,000 | President Chain Store Corp. | 8,276,096 | ||||||
1,163,750 | Taiwan Semiconductor Manufacturing Co., Ltd. | 8,910,921 | ||||||
2,699,584 | Win Semiconductors Corp. | 25,512,852 | ||||||
68,927,036 | ||||||||
Turkey — 4.7% | ||||||||
2,217,828 | Aksa Akrilik Kimya Sanayii A/S† | 7,514,863 | ||||||
2,629,499 | Anadolu Hayat Emeklilik A/S† | 5,723,088 | ||||||
196,051 | AvivaSA Emeklilik ve Hayat A/S† | 937,197 | ||||||
10,425,279 | Turk Telekomunikasyon A/S * | 17,686,595 | ||||||
31,861,743 | ||||||||
United Arab Emirates — 2.4% | ||||||||
4,384,282 | First Abu Dhabi Bank | 12,225,340 | ||||||
3,988,700 | Union National Bank† | 4,126,897 | ||||||
16,352,237 | ||||||||
United Kingdom — 9.7% | ||||||||
492,170 | Coca-Cola HBC AG* | 16,073,288 | ||||||
2,555,650 | HSBC Holdings PLC | 26,275,448 | ||||||
613,862 | X5 Retail Group NV GDR* | 23,185,568 | ||||||
65,534,304 | ||||||||
Total Common Stocks (Cost $498,063,016) | 650,986,588 | |||||||
Short-Term Investments — 3.5% | ||||||||
Money Market Funds — 3.5% | ||||||||
24,045,104 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 24,045,104 | |||||||
Total Short-Term Investments (Cost $24,045,104) | 24,045,104 | |||||||
Total Investments — 99.4% (Cost $522,108,120) | 675,031,692 | |||||||
Other Assets in Excess of Liabilities — 0.6% | 4,072,821 | |||||||
NET ASSETS — 100.0% | $ | 679,104,513 | ||||||
The accompanying notes are an integral part of these financial statements.
84
Brown Advisory – Somerset Emerging Markets Fund
Schedule of Investments
December 31, 2017 (Unaudited)
PORTFOLIO HOLDINGS | ||||
% of Net Assets | ||||
South Korea | 20.0 | % | ||
Taiwan | 10.2 | % | ||
United Kingdom | 9.7 | % | ||
India | 9.4 | % | ||
Hungary | 8.6 | % | ||
South Africa | 5.3 | % | ||
Brazil | 5.1 | % | ||
Chile | 4.7 | % | ||
Turkey | 4.7 | % | ||
China | 3.7 | % | ||
Poland | 3.5 | % | ||
Money Market Funds | 3.5 | % | ||
Indonesia | 2.9 | % | ||
United Arab Emirates | 2.4 | % | ||
Philippines | 1.8 | % | ||
Russia | 1.5 | % | ||
Portugal | 1.2 | % | ||
Nigeria | 0.7 | % | ||
Greece | 0.5 | % | ||
Other Assets and Liabilities | 0.6 | % | ||
100.0 | % |
ADR — American Depository Receipt | ||
GDR — Global Depository Receipt | ||
* | Non-Income Producing | |
† | All or a portion of this security is considered illiquid. At December 31, 2017, the total market value of securities considered illiquid was $74,818,960 or 11.0% of net assets. | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
85
Brown Advisory – Macquarie Asia New Stars Fund
A Message to Our Shareholders
December 31, 2017
Dear Shareholders:
During the six-month period ended December 31, 2017, the Brown Advisory – Macquarie Asia New Stars Fund Institutional Shares (the “Fund”) increased 10.58% in value. During the same period, the MSCI AC Asia ex Japan SMID Cap Index (the “Index”), the Fund’s benchmark, increased 14.81%.
Asian equities sustained their rally from the start of 2017 into the second half of the year as markets–underpinned by increasing earnings expectations–rose further. Despite this year’s impressive rally, investor optimism for Asia’s outlook remains high with the region’s 12-month forward earnings currently expected to rise by over 15%.
Two key themes drove Asian markets throughout 2017: the continued economic strength of China and a compelling rally across the information technology (IT) sector in the region which produced meaningful returns for investors. The Fund benefitted from this rally in the second half of 2017 delivering attractive returns across both Greater China and the IT sector; countries including China and Taiwan were large beneficiaries of increased IT product demand with the launch of the new iPhone proving to be a catalyst.
The Fund’s positioning across the financials sector contributed the most to relative performance against the Index. Favorable stock picking in high conviction Indian diversified financials, as well as Philippine and South Korean bank positions, helped the Fund outperform.
Despite China being one the best contributors to the Fund’s performance vs. the Index in 2017, it was the key detractor in the second half of the year. The negative performance of this allocation came from a combination of share price decline in a key holding and an underweight to Chinese property developers. The Chinese property sector outperformed the broader Index by almost 2.5 times during the period and rose by nearly half for the full year. Chinese property developers are highly reliant on external funding to support their activities and there are clear signs that this is again under pressure as policymakers turn their focus on curbing property prices. Given the unfolding dynamics of the industry, our outlook for the sector remains negative. We are focused on delivering returns to investors via quality investments with strong balance sheets, sustainable profitability and management teams in whom we trust. While 2017 (and even 2016) proved challenging for the Fund in an environment where lower-quality companies thrived, we believe our focus on sustainable businesses will reward and protect investors when volatility returns.
In addition to the Chinese underperformance, certain stocks in which we have high long-term conviction suffered stock-specific and short-term headwinds during the period. Recognizing their attractive valuations, we opportunistically increased the Fund’s positions in a number of these stocks, and have since seen them rally from their low-points coming into the end of 2017.
From an individual stock perspective, Shriram Transport Finance (an Indian commercial vehicle finance provider) contributed the most to the Fund’s performance rising 50.5% after discontinuing merger discussions with IDFC in October. Investors were concerned that the planned merger would hold little benefit for Shriram, and viewed its cancellation positively. The release of strong financial results for 2Q 2017 in early November added further support to the rally. We added further to the Fund’s position in Shriram in late October prior to the release of the 2Q 2017 result, recognizing both its undemanding valuation and potential to benefit from the Indian government’s focus on economic growth. In our view, the company still trades at a reasonable valuation and we believe it should benefit from improvements to both the economy and asset quality; a recent research trip to India during which we met with both high- and lower-level company management, as well as numerous customers, reinforced our investment thesis and supported this view.
Indonesia was the only country where the Fund produced a negative return over the period, dragged down by the -30.8% return of Matahari Department Store–one of the Fund’s worst-performing stocks over the six-month period. Matahari faced short-term issues as weak Indonesian consumption and lower-than-expected sales during a June religious holiday led the company to revise their same-store sales growth outlook for FY2017. The market reaction led to a period of share price declines from June to a low at the end of October. After a company visit in early November strengthened our conviction in Matahari, we increased the Fund’s position based on what we see as attractive valuation and our belief that the stock was poised to outperform as Indonesian consumption recovered. Since increasing our position size, Matahari has performed well and rallied off its lows; we continue to hold a high level of optimism in the outlook for this position.
During the quarter, the Fund continued taking profits in information technology stocks which had experienced strong rallies during the year. We then deployed the cash into higher conviction stock ideas, particularly those where recent volatility provided an opportunity to increase position sizes at an attractive valuation.
86
Brown Advisory – Macquarie Asia New Stars Fund
A Message to Our Shareholders
December 31, 2017
Despite the (often rapid) changing market dynamics, we remain conservative and patient investors in Asian equity markets. We will continue to look for select investments that leverage Asia’s sustainable growth themes, as we believe this approach will be rewarded in the long term.
Sincerely,
Sam Le Cornu
Portfolio Manager
John Bugg
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 foreign securities which involve political, economic and currency risks, greater volatility and differences in accounting methods. These risks are greater for investments in emerging markets. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Investments in small and medium capitalization companies generally carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The Fund may invest in ETFs, which may trade at a discount to the aggregate value of the underlying securities and although expense ratios for ETFs are generally low, frequent trading of ETFs by the Fund can generate brokerage expenses. In addition, the fund is susceptible to risks from investments in derivatives, private placements, REITs, and its investments in other investment companies.
Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security. For a complete list of fund holdings, please refer to the Schedule of Investments provided in this report.
Definitions for terms and indices are provided in the Glossary of Terms.
87
Brown Advisory – Macquarie Asia New Stars Fund
Schedule of Investments
December 31, 2017 (Unaudited)
Shares | Security Description | Value $ | ||||||
Common Stocks — 94.2% | ||||||||
China — 39.9% | ||||||||
206,903 | Autohome, Inc. ADR | 13,380,417 | ||||||
70,000 | China Biologic Products Holdings, Inc.* | 5,513,900 | ||||||
71,134 | China Lodging Group, Ltd. ADR | 10,273,884 | ||||||
2,865,000 | China Medical System Holdings, Ltd. | 6,669,123 | ||||||
23,324,000 | China Power International Development, Ltd. | 6,119,696 | ||||||
7,360,000 | China State Construction | |||||||
International Holdings, Ltd. | 10,281,057 | |||||||
20,397,000 | Guotai Junan International Holdings, Ltd. | 6,379,340 | ||||||
1,407,000 | Haier Electronics Group Co., Ltd. | 3,835,169 | ||||||
1,228,000 | Kingsoft Corp., Ltd. | 4,068,557 | ||||||
13,320,000 | Li & Fung, Ltd. | 7,298,801 | ||||||
6,940,500 | Li Ning Co., Ltd.* | 5,613,047 | ||||||
3,486,000 | Melco International Development, Ltd. | 10,222,675 | ||||||
47,555 | New Oriental Education & | |||||||
Technology Group, Inc. ADR | 4,470,170 | |||||||
41,400 | Sohu.com, Inc.* | 1,794,690 | ||||||
192,400 | Tarena International, Inc. ADR | 2,884,076 | ||||||
5,454,000 | Zhejiang Expressway Co., Ltd. | 5,996,513 | ||||||
1,608,700 | Zhuzhou CRRC Times Electric Co., Ltd. | 10,440,573 | ||||||
115,241,688 | ||||||||
India — 15.4% | ||||||||
334,101 | Apollo Hospitals Enterprise, Ltd. | 6,297,280 | ||||||
1,198,066 | Castrol India, Ltd. | 3,623,467 | ||||||
1,640,565 | Petronet LNG, Ltd. | 6,533,696 | ||||||
576,638 | Shriram Transport Finance Co., Ltd. | 13,366,573 | ||||||
286,765 | Tata Chemicals, Ltd. | 3,286,717 | ||||||
234,544 | UPL, Ltd. | 2,800,667 | ||||||
1,703,292 | Yes Bank, Ltd. | 8,391,726 | ||||||
44,300,126 | ||||||||
Indonesia — 3.6% | ||||||||
9,091,400 | Matahari Department Store Tbk† | 6,678,850 | ||||||
1,377,500 | United Tractors Tbk | 3,594,141 | ||||||
10,272,991 | ||||||||
Philippines — 2.5% | ||||||||
3,596,700 | Metropolitan Bank & Trust Co.† | 7,297,090 | ||||||
Singapore — 0.9% | ||||||||
491,100 | Singapore Exchange, Ltd. | 2,727,022 | ||||||
South Korea — 19.2% | ||||||||
14,879 | CJ Logistics Corp.* | 1,945,659 | ||||||
19,741 | Com2uS Corp. | 2,507,441 | ||||||
23,049 | Hugel, Inc.* | 12,003,727 | ||||||
72,087 | Hyundai Engineering & Construction Co., Ltd. | 2,444,121 | ||||||
35,700 | Innox Advanced Materials Co., Ltd.* | 2,844,043 | ||||||
179,344 | KB Financial Group, Inc. | 10,614,137 | ||||||
12,440 | KCC Corp. | 4,419,235 | ||||||
66,958 | Korea Kolmar Co., Ltd. | 5,120,678 | ||||||
57,000 | Samsung Card Co., Ltd. | 2,108,529 | ||||||
43,201 | Samsung SDI Co., Ltd. | 8,236,092 | ||||||
28,460 | S-Oil Corp. | 3,108,523 | ||||||
55,352,185 | ||||||||
Taiwan — 11.1% | ||||||||
234,000 | Airtac International Group | 4,191,578 | ||||||
367,000 | General Interface Solution Holding, Ltd. | 2,432,805 | ||||||
377,300 | Gourmet Master Co., Ltd. | 5,499,532 | ||||||
3,539,346 | Macronix International Co., Ltd.* | 5,228,239 | ||||||
993,000 | Nanya Technology Corp. | 2,527,584 | ||||||
2,626,000 | Pou Chen Corp. | 3,394,066 | ||||||
544,000 | TCI Co., Ltd. | 5,246,501 | ||||||
1,635,000 | Zhen Ding Technology Holding, Ltd. | 3,579,955 | ||||||
32,100,260 | ||||||||
Thailand — 1.6% | ||||||||
8,205,400 | Home Product Center PCL | 3,222,741 | ||||||
1,016,700 | Minor International PCL | 1,364,855 | ||||||
4,587,596 | ||||||||
Total Common Stocks (Cost $245,564,862) | 271,878,958 | |||||||
Real Estate Investment Trusts — 1.0% | ||||||||
Singapore — 1.0% | ||||||||
3,148,900 | Mapletree Greater China Commercial Trust | 2,895,919 | ||||||
Total Real Estate Investment Trusts (Cost $2,081,708) | 2,895,919 | |||||||
Short-Term Investments — 4.3% | ||||||||
Money Market Funds — 4.3% | ||||||||
12,342,846 | Cash Account Trust — Government | |||||||
& Agency Portfolio — | ||||||||
Institutional Shares, 1.22%# | 12,342,846 | |||||||
Total Short-Term Investments (Cost $12,342,846) | 12,342,846 | |||||||
Total Investments — 99.5% (Cost $259,989,416) | 287,117,723 | |||||||
Other Assets in Excess of Liabilities — 0.5% | 1,495,467 | |||||||
NET ASSETS — 100.0% | $ | 288,613,190 |
PORTFOLIO HOLDINGS
% of Net Assets | ||||
China | 39.9 | % | ||
South Korea | 19.2 | % | ||
India | 15.4 | % | ||
Taiwan | 11.1 | % | ||
Money Market Funds | 4.3 | % | ||
Indonesia | 3.6 | % | ||
Philippines | 2.5 | % | ||
Singapore | 1.9 | % | ||
Thailand | 1.6 | % | ||
Other Assets and Liabilities | 0.5 | % | ||
100.0 | % |
ADR — American Depositary Receipt | ||
* | Non-Income Producing | |
† | All or a portion of this security is considered illiquid. At December 31, 2017, the total market value of securities considered illiquid was $4,117,085 or 1.4% of net assets. | |
# | Annualized seven-day yield as of December 31, 2017. |
The accompanying notes are an integral part of these financial statements.
88
Statements of Assets and Liabilities
December 31, 2017 (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 | $ | 1,098,998,920 | $ | 275,061,324 | $ | 70,942,736 | $ | 331,289,546 | ||||||||
Net unrealized appreciation (depreciation) | 780,230,044 | 176,620,040 | 46,157,110 | 168,531,924 | ||||||||||||
Total investments, at market value | 1,879,228,964 | 451,681,364 | 117,099,846 | 499,821,470 | ||||||||||||
Cash | — | 28,368 | — | — | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold | — | 2,982,709 | — | — | ||||||||||||
Fund shares sold | 2,071,480 | 511,857 | 16,572 | 803,956 | ||||||||||||
Interest and dividends | 526,226 | 289,748 | 294,757 | 269,622 | ||||||||||||
Prepaid expenses and other assets | 75,500 | 49,576 | 51,255 | 46,854 | ||||||||||||
Total Assets | 1,881,902,170 | 455,543,622 | 117,462,430 | 500,941,902 | ||||||||||||
LIABILITIES | ||||||||||||||||
Payables: | ||||||||||||||||
Investments purchased | — | — | — | 2,538,471 | ||||||||||||
Fund shares redeemed | 946,617 | 61,785 | — | 75,235 | ||||||||||||
Distribution to shareholders | 1,386 | — | — | — | ||||||||||||
Accrued Liabilities: | ||||||||||||||||
Investment advisory fees | 975,593 | 232,136 | 60,448 | 252,793 | ||||||||||||
Service fees | 205,260 | 43,614 | 11,213 | 29,494 | ||||||||||||
Administration, accounting and transfer agent fees | 134,653 | 31,341 | 8,179 | 33,206 | ||||||||||||
Business management fees | 81,299 | 19,345 | 5,037 | 21,066 | ||||||||||||
Trustee fees | 11,959 | 2,830 | 746 | 2,977 | ||||||||||||
Distribution fees | 11,675 | 8,366 | 4,132 | 247,907 | ||||||||||||
Professional fees | 21,075 | 12,883 | 10,820 | 12,990 | ||||||||||||
Custody fees | 9,499 | 1,944 | 906 | 1,814 | ||||||||||||
Other liabilities | 35,768 | 6,491 | 4,691 | 9,244 | ||||||||||||
Total Liabilities | 2,434,784 | 420,735 | 106,172 | 3,225,197 | ||||||||||||
NET ASSETS | $ | 1,879,467,386 | $ | 455,122,887 | $ | 117,356,258 | $ | 497,716,705 | ||||||||
COMPONENTS OF NET ASSETS | ||||||||||||||||
Paid-in capital | $ | 1,074,394,453 | $ | 279,534,052 | $ | 69,610,036 | $ | 318,822,738 | ||||||||
Undistributed (Accumulated) net investment income (loss) | (4,557,557 | ) | 18,901 | 36,504 | (847,895 | ) | ||||||||||
Accumulated net realized gain (loss) | 29,400,446 | (1,050,106 | ) | 1,552,608 | 11,209,938 | |||||||||||
Unrealized appreciation (depreciation) on investments | 780,230,044 | 176,620,040 | 46,157,110 | 168,531,924 | ||||||||||||
NET ASSETS | $ | 1,879,467,386 | $ | 455,122,887 | $ | 117,356,258 | $ | 497,716,705 | ||||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||||||
Institutional Shares: | ||||||||||||||||
Net assets | $ | 284,431,789 | $ | 113,688,544 | $ | 30,572,901 | $ | 264,809,311 | ||||||||
Shares outstanding (unlimited shares authorized) | 13,554,720 | 5,475,351 | 2,091,649 | 12,702,414 | ||||||||||||
Net asset value per share | $ | 20.98 | $ | 20.76 | $ | 14.62 | $ | 20.85 | ||||||||
Investor Shares: | ||||||||||||||||
Net assets | $ | 1,589,131,291 | $ | 335,237,344 | $ | 84,158,668 | $ | 48,951,631 | ||||||||
Shares outstanding (unlimited shares authorized) | 76,389,599 | 16,165,129 | 5,759,314 | 2,370,260 | ||||||||||||
Net asset value per share | $ | 20.80 | $ | 20.74 | $ | 14.61 | $ | 20.65 | ||||||||
Advisor Shares: | ||||||||||||||||
Net assets | $ | 5,904,306 | $ | 6,196,999 | $ | 2,624,689 | $ | 183,955,763 | ||||||||
Shares outstanding (unlimited shares authorized) | 298,015 | 298,302 | 179,921 | 9,033,933 | ||||||||||||
Net asset value per share | $ | 19.81 | $ | 20.77 | $ | 14.59 | $ | 20.36 |
The accompanying notes are an integral part of these financial statements.
89
Statements of Assets and Liabilities
December 31, 2017 (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 | $ | 8,577,786 | $ | 599,205,567 | $ | 940,992,698 | $ | 38,629,711 | ||||||||
Net unrealized appreciation (depreciation) | 86,837 | 171,873,829 | 358,618,211 | 12,544,388 | ||||||||||||
Total investments, at market value | 8,664,623 | 771,079,396 | 1,299,610,909 | 51,174,099 | ||||||||||||
Cash | — | 15 | 11 | — | ||||||||||||
Foreign currency (Cost $—, $—, $— and $611,343, respectively) | — | — | — | 626,319 | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold | — | — | 463,472 | — | ||||||||||||
Fund shares sold | 1,545,070 | 2,193,732 | 1,984,326 | 772,000 | ||||||||||||
Interest and dividends | 1,745 | 176,136 | 3,089,213 | 28,147 | ||||||||||||
Due from advisor, net | 5,567 | — | — | — | ||||||||||||
Prepaid expenses and other assets | 19,821 | 69,453 | 56,303 | 18,495 | ||||||||||||
Total Assets | 10,236,826 | 773,518,732 | 1,305,204,234 | 52,619,060 | ||||||||||||
LIABILITIES | ||||||||||||||||
Payables: | ||||||||||||||||
Investments purchased | 1,097,536 | 6,532,368 | 524,269 | 471,642 | ||||||||||||
Fund shares redeemed | — | 260,537 | 266,381 | — | ||||||||||||
Accrued Liabilities: | ||||||||||||||||
Investment advisory fees | — | 548,861 | 949,579 | 12,379 | ||||||||||||
Service fees | 607 | 50,747 | 117,185 | 6,351 | ||||||||||||
Administration, accounting and transfer agent fees | 452 | 51,595 | 92,058 | 3,947 | ||||||||||||
Business management fees | 202 | 32,286 | 55,858 | 2,117 | ||||||||||||
Trustee fees | 247 | 4,203 | 8,251 | 290 | ||||||||||||
Distribution fees | — | 33,220 | 44,508 | — | ||||||||||||
Professional fees | 4,295 | 15,277 | 18,679 | 10,349 | ||||||||||||
Custody fees | 2,538 | 3,587 | 6,666 | 3,681 | ||||||||||||
Other liabilities | 2,235 | 20,029 | 19,251 | 3,697 | ||||||||||||
Total Liabilities | 1,108,112 | 7,552,710 | 2,102,685 | 514,453 | ||||||||||||
NET ASSETS | $ | 9,128,714 | $ | 765,966,022 | $ | 1,303,101,549 | $ | 52,104,607 | ||||||||
COMPONENTS OF NET ASSETS | ||||||||||||||||
Paid-in capital | $ | 9,046,132 | $ | 600,525,611 | $ | 931,566,675 | $ | 40,935,686 | ||||||||
Undistributed (Accumulated) net investment income (loss) | (1,166 | ) | (6,069,821 | ) | 782,332 | (16,566 | ) | |||||||||
Accumulated net realized gain (loss) | (3,089 | ) | (363,597 | ) | 12,134,331 | (1,374,557 | ) | |||||||||
Unrealized appreciation (depreciation) on investments | 86,837 | 171,873,829 | 358,618,211 | 12,544,388 | ||||||||||||
Unrealized appreciation (depreciation) on foreign currency/receivables | — | — | — | 15,656 | ||||||||||||
NET ASSETS | $ | 9,128,714 | $ | 765,966,022 | $ | 1,303,101,549 | $ | 52,104,607 | ||||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||||||
Institutional Shares: | ||||||||||||||||
Net assets | $ | — | $ | 366,656,378 | $ | 391,921,993 | $ | — | ||||||||
Shares outstanding (unlimited shares authorized) | — | 9,892,211 | 13,774,862 | — | ||||||||||||
Net asset value per share | $ | — | $ | 37.07 | $ | 28.45 | $ | — | ||||||||
Investor Shares: | ||||||||||||||||
Net assets | $ | 9,128,714 | $ | 380,238,009 | $ | 886,374,921 | $ | 52,104,607 | ||||||||
Shares outstanding (unlimited shares authorized) | 888,411 | 20,476,792 | 31,170,086 | 3,994,263 | ||||||||||||
Net asset value per share | $ | 10.28 | $ | 18.57 | $ | 28.44 | $ | 13.04 | ||||||||
Advisor Shares: | ||||||||||||||||
Net assets | $ | — | $ | 19,071,635 | $ | 24,804,635 | $ | — | ||||||||
Shares outstanding (unlimited shares authorized) | — | 1,072,629 | 875,259 | — | ||||||||||||
Net asset value per share | $ | — | $ | 17.78 | $ | 28.34 | $ | — |
The accompanying notes are an integral part of these financial statements.
90
Statements of Assets and Liabilities
December 31, 2017 (Unaudited)
BROWN | BROWN | BROWN | ||||||||||
ADVISORY | ADVISORY | ADVISORY | ||||||||||
INTERMEDIATE | TOTAL | STRATEGIC | ||||||||||
INCOME | RETURN | BOND | ||||||||||
FUND | FUND | FUND | ||||||||||
ASSETS | ||||||||||||
Investments: | ||||||||||||
Total investments – unaffiliated, at cost | $ | 106,250,908 | $ | 124,238,243 | $ | 139,084,600 | ||||||
Total investments – affiliated, at cost (Note 3) | 30,238,441 | — | — | |||||||||
Total cost of investments | 136,489,349 | 124,238,243 | 139,084,600 | |||||||||
Net unrealized appreciation (depreciation) – unaffiliated | (65,042 | ) | 307,079 | 651,354 | ||||||||
Net unrealized appreciation (depreciation) – affiliated (Note 3) | (735,829 | ) | — | — | ||||||||
Total unrealized appreciation (depreciation) | (800,871 | ) | 307,079 | 651,354 | ||||||||
Total investments – unaffiliated, at market value | 106,185,866 | 124,545,322 | 139,735,954 | |||||||||
Total investments – affiliated, at market value (Note 3) | 29,502,612 | — | — | |||||||||
Total investments, at market value | 135,688,478 | 124,545,322 | 139,735,954 | |||||||||
Cash | — | 14,809 | 14,876 | |||||||||
Deposit at broker – futures contracts (Note 6) | — | 1,140,994 | 515,096 | |||||||||
Gross unrealized appreciation – futures contracts (Note 6) | — | 82,599 | 46,402 | |||||||||
Receivables: | ||||||||||||
Investments sold | 36,330 | 624,466 | 100,000 | |||||||||
Fund shares sold | 356,566 | 368,482 | 542,608 | |||||||||
Interest and dividends | 723,633 | 807,577 | 877,665 | |||||||||
Prepaid expenses and other assets | 28,451 | 35,540 | 36,088 | |||||||||
Total Assets | 136,833,458 | 127,619,789 | 141,868,689 | |||||||||
LIABILITIES | ||||||||||||
Gross unrealized depreciation on futures contracts (Note 6) | — | — | — | |||||||||
Payables: | ||||||||||||
Investments purchased | 1,368,710 | 11,075,431 | 15,133,177 | |||||||||
Fund shares redeemed | 98,855 | — | 5,000 | |||||||||
Accrued Liabilities: | ||||||||||||
Investment advisory fees, net | 26,786 | 29,353 | 42,742 | |||||||||
Distribution fees | 4,157 | — | 439 | |||||||||
Service fees | 5,719 | 135 | 5,350 | |||||||||
Administration, accounting and transfer agent fees | 12,599 | 14,818 | 23,177 | |||||||||
Professional fees | 10,895 | 10,797 | 10,807 | |||||||||
Business management fees | 5,719 | 4,892 | 5,350 | |||||||||
Trustee fees | 884 | 718 | 763 | |||||||||
Custodian fees | 1,335 | 1,027 | 2,360 | |||||||||
Other liabilities | 2,989 | 4,502 | 5,553 | |||||||||
Total Liabilities | 1,538,648 | 11,141,673 | 15,234,718 | |||||||||
NET ASSETS | $ | 135,294,810 | $ | 116,478,116 | $ | 126,633,971 | ||||||
COMPONENTS OF NET ASSETS | ||||||||||||
Paid-in capital | $ | 136,287,834 | $ | 116,181,367 | $ | 129,067,790 | ||||||
Undistributed (Accumulated) net investment income (loss) | (66,635 | ) | (22,178 | ) | (152,330 | ) | ||||||
Accumulated net realized gain (loss) | (125,518 | ) | (70,751 | ) | (2,979,245 | ) | ||||||
Unrealized appreciation (depreciation) on investments | (800,871 | ) | 307,079 | 651,354 | ||||||||
Unrealized appreciation (depreciation) on futures contracts (Note 6) | — | 82,599 | 46,402 | |||||||||
NET ASSETS | $ | 135,294,810 | $ | 116,478,116 | $ | 126,633,971 | ||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||
Institutional Shares: | ||||||||||||
Net assets | $ | — | $ | 113,269,284 | $ | — | ||||||
Shares outstanding (unlimited shares authorized) | — | 11,275,305 | — | |||||||||
Net asset value per share | $ | — | $ | 10.05 | $ | — | ||||||
Investor Shares: | ||||||||||||
Net assets | $ | 131,363,464 | $ | 3,208,832 | $ | 126,422,901 | ||||||
Shares outstanding (unlimited shares authorized) | 12,424,880 | 319,394 | 13,144,454 | |||||||||
Net asset value per share | $ | 10.57 | $ | 10.05 | $ | 9.62 | ||||||
Advisor Shares: | ||||||||||||
Net assets | $ | 3,931,346 | $ | — | $ | 211,070 | ||||||
Shares outstanding (unlimited shares authorized) | 379,714 | — | 21,930 | |||||||||
Net asset value per share | $ | 10.35 | $ | — | $ | 9.62 |
The accompanying notes are an integral part of these financial statements.
91
Statements of Assets and Liabilities
December 31, 2017 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | ADVISORY | |||||||||||||
SUSTAINABLE | MARYLAND | TAX EXEMPT | MORTGAGE | |||||||||||||
BOND | BOND | BOND | SECURITIES | |||||||||||||
FUND | FUND | FUND | FUND | |||||||||||||
ASSETS | ||||||||||||||||
Investments: | ||||||||||||||||
Total investments, at cost | $ | 24,912,092 | $ | 182,479,542 | $ | 305,556,921 | $ | 428,171,845 | ||||||||
Net unrealized appreciation (depreciation) | (58,958 | ) | 983,116 | 1,249,327 | (1,673,842 | ) | ||||||||||
Total investments, at market value | 24,853,134 | 183,462,658 | 306,806,248 | 426,498,003 | ||||||||||||
Cash | — | — | — | 518,472 | ||||||||||||
Deposit at broker – futures contracts (Note 6) | 71,990 | — | — | 408,667 | ||||||||||||
Gross unrealized appreciation – futures contracts (Note 6) | 9,605 | — | — | 70,949 | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold | 3,995 | — | — | 34,239 | ||||||||||||
Fund shares sold | — | 258,176 | 2,282,595 | 235,000 | ||||||||||||
Interest and dividends | 124,658 | 2,517,848 | 3,472,903 | 1,330,179 | ||||||||||||
Due from advisor, net | 5,490 | — | — | — | ||||||||||||
Prepaid expenses and other assets | 17,782 | 7,288 | 20,910 | 40,326 | ||||||||||||
Total Assets | 25,086,654 | 186,245,970 | 312,582,656 | 429,135,835 | ||||||||||||
LIABILITIES | ||||||||||||||||
Gross unrealized depreciation on futures contracts (Note 6) | — | — | — | 58,358 | ||||||||||||
Payables: | ||||||||||||||||
Investments purchased | 2,160,486 | — | — | 76,932,316 | ||||||||||||
Fund shares redeemed | — | 25,621 | 35,612 | — | ||||||||||||
Distribution to shareholders | — | 293,053 | 602,356 | — | ||||||||||||
Accrued Liabilities: | ||||||||||||||||
Investment advisory fees, net | — | 47,491 | 76,062 | 88,570 | ||||||||||||
Administration, accounting and transfer agent fees | 5,935 | 16,396 | 25,348 | 51,313 | ||||||||||||
Service fees | 791 | 7,915 | 12,677 | 17 | ||||||||||||
Business management fees | 791 | 7,915 | 12,677 | 14,762 | ||||||||||||
Custodian fees | 154 | 973 | 1,220 | 6,456 | ||||||||||||
Trustee fees | 149 | 1,178 | 1,770 | 2,194 | ||||||||||||
Professional fees | 5,726 | 11,171 | 11,813 | 11,997 | ||||||||||||
Other liabilities | 2,627 | 4,033 | 3,983 | 6,636 | ||||||||||||
Total Liabilities | 2,176,659 | 415,746 | 783,518 | 77,172,619 | ||||||||||||
NET ASSETS | $ | 22,909,995 | $ | 185,830,224 | $ | 311,799,138 | $ | 351,963,216 | ||||||||
COMPONENTS OF NET ASSETS | ||||||||||||||||
Paid-in capital | $ | 22,971,363 | $ | 185,244,195 | $ | 313,070,129 | $ | 360,883,124 | ||||||||
Undistributed (Accumulated) net investment income (loss) | (477 | ) | 63 | 15 | (971,885 | ) | ||||||||||
Accumulated net realized gain (loss) | (11,538 | ) | (397,150 | ) | (2,520,333 | ) | (6,286,772 | ) | ||||||||
Unrealized appreciation (depreciation) on investments | (58,958 | ) | 983,116 | 1,249,327 | (1,673,842 | ) | ||||||||||
Unrealized appreciation (depreciation) on futures contracts (Note 6) | 9,605 | — | — | 12,591 | ||||||||||||
NET ASSETS | $ | 22,909,995 | $ | 185,830,224 | $ | 311,799,138 | $ | 351,963,216 | ||||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||||||
Institutional Shares: | ||||||||||||||||
Net assets | $ | — | $ | — | $ | — | $ | 351,567,394 | ||||||||
Shares outstanding (unlimited shares authorized) | — | — | — | 35,674,475 | ||||||||||||
Net asset value per share | $ | — | $ | — | $ | — | $ | 9.85 | ||||||||
Investor Shares: | ||||||||||||||||
Net assets | $ | 22,909,995 | $ | 185,830,224 | $ | 311,799,138 | $ | 395,822 | ||||||||
Shares outstanding (unlimited shares authorized) | 2,300,893 | 17,523,628 | 31,219,236 | 40,138 | ||||||||||||
Net asset value per share | $ | 9.96 | $ | 10.60 | $ | 9.99 | $ | 9.86 | ||||||||
Advisor Shares: | ||||||||||||||||
Net assets | $ | — | $ | — | $ | — | $ | — | ||||||||
Shares outstanding (unlimited shares authorized) | — | — | — | — | ||||||||||||
Net asset value per share | $ | — | $ | — | $ | — | $ | — |
The accompanying notes are an integral part of these financial statements.
92
Statements of Assets and Liabilities
December 31, 2017 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY – | ADVISORY – | ADVISORY – | ADVISORY – | |||||||||||||
WMC | WMC | SOMERSET | MACQUARIE | |||||||||||||
STRATEGIC | JAPAN ALPHA | EMERGING | ASIA | |||||||||||||
EUROPEAN | OPPORTUNITIES | MARKETS | NEW STARS | |||||||||||||
EQUITY FUND | FUND | FUND | FUND | |||||||||||||
ASSETS | ||||||||||||||||
Investments: | ||||||||||||||||
Total investments, at cost | $ | 1,081,048,083 | $ | 849,395,578 | $ | 522,108,120 | $ | 259,989,416 | ||||||||
Net unrealized appreciation (depreciation) | 271,398,271 | 243,345,324 | 152,923,572 | 27,128,307 | ||||||||||||
Total investments, at market value | 1,352,446,354 | 1,092,740,902 | 675,031,692 | 287,117,723 | ||||||||||||
Foreign currency (Cost of $5, $—, $117,273 and $14,056, respectively) | 5 | — | 115,019 | 14,128 | ||||||||||||
Deposit at broker – futures contracts (Note 6) | — | 97,353 | — | — | ||||||||||||
Gross unrealized appreciation – futures contracts (Note 6) | — | 746,988 | — | — | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold | 347,365 | 8,275,198 | — | 478,380 | ||||||||||||
Fund shares sold | 3,591,596 | 1,475,779 | 2,528,687 | 862,419 | ||||||||||||
Interest and dividends | 2,825,696 | 1,864,252 | 2,333,372 | 625,251 | ||||||||||||
Prepaid expenses and other assets | 92,790 | 67,404 | 63,206 | 38,498 | ||||||||||||
Total Assets | 1,359,303,806 | 1,105,267,876 | 680,071,976 | 289,136,399 | ||||||||||||
LIABILITIES | ||||||||||||||||
Gross unrealized depreciation on futures contracts (Note 6) | — | — | — | — | ||||||||||||
Payables: | ||||||||||||||||
Investments purchased | 1,876,723 | 10,020,659 | — | — | ||||||||||||
Fund shares redeemed | 434,674 | 240,804 | 206,192 | 122,426 | ||||||||||||
Variation margin due to broker (Note 6) | — | 59,158 | — | — | ||||||||||||
Accrued Liabilities: | ||||||||||||||||
Investment advisory fees | 1,002,440 | 948,591 | 503,542 | 294,477 | ||||||||||||
Administration, accounting and transfer agent fees | 89,723 | 74,330 | 45,586 | 18,490 | ||||||||||||
Custodian fees | 53,158 | 86,582 | 131,091 | 55,428 | ||||||||||||
Business management fees | 55,691 | 47,430 | 27,975 | 11,779 | ||||||||||||
Distribution fees | 23,175 | 723 | 492 | — | ||||||||||||
Professional fees | 18,268 | 16,448 | 14,206 | 11,712 | ||||||||||||
Trustee fees | 8,169 | 8,301 | 4,175 | 1,700 | ||||||||||||
Service fees | 3,753 | 478 | 23,678 | 347 | ||||||||||||
Other liabilities | 145,531 | 60,500 | 10,526 | 6,850 | ||||||||||||
Total Liabilities | 3,711,305 | 11,564,004 | 967,463 | 523,209 | ||||||||||||
NET ASSETS | $ | 1,355,592,501 | $ | 1,093,703,872 | $ | 679,104,513 | $ | 288,613,190 | ||||||||
COMPONENTS OF NET ASSETS | ||||||||||||||||
Paid-in capital | $ | 1,102,151,205 | $ | 816,720,419 | $ | 575,741,513 | $ | 274,535,238 | ||||||||
Undistributed (Accumulated) net investment income (loss) | (2,088,368 | ) | (13,982,093 | ) | (90,704 | ) | 114,229 | |||||||||
Accumulated net realized gain (loss) | (15,935,067 | ) | 46,876,550 | (49,476,411 | ) | (13,167,084 | ) | |||||||||
Unrealized appreciation (depreciation) on investments | 271,398,271 | 243,345,324 | 152,923,572 | 27,128,307 | ||||||||||||
Unrealized appreciation (depreciation) on futures contracts (Note 6) | — | 746,988 | — | — | ||||||||||||
Unrealized appreciation (depreciation) on foreign currency/receivables | 66,460 | (3,316 | ) | 6,543 | 2,500 | |||||||||||
NET ASSETS | $ | 1,355,592,501 | $ | 1,093,703,872 | $ | 679,104,513 | $ | 288,613,190 | ||||||||
COMPUTATION OF NET ASSET VALUE | ||||||||||||||||
Institutional Shares: | ||||||||||||||||
Net assets | $ | 1,324,700,101 | $ | 1,089,925,865 | $ | 488,448,609 | $ | 285,787,094 | ||||||||
Shares outstanding (unlimited shares authorized) | 102,712,616 | 95,152,653 | 43,470,770 | 26,273,083 | ||||||||||||
Net asset value per share | $ | 12.90 | $ | 11.45 | $ | 11.24 | $ | 10.88 | ||||||||
Investor Shares: | ||||||||||||||||
Net assets | $ | 12,643,536 | $ | 3,402,125 | $ | 190,383,075 | $ | 2,826,096 | ||||||||
Shares outstanding (unlimited shares authorized) | 980,874 | 298,441 | 16,969,435 | 260,754 | ||||||||||||
Net asset value per share | $ | 12.89 | $ | 11.40 | $ | 11.22 | $ | 10.84 | ||||||||
Advisor Shares: | ||||||||||||||||
Net assets | $ | 18,248,864 | $ | 375,882 | $ | 272,829 | $ | — | ||||||||
Shares outstanding (unlimited shares authorized) | 1,425,805 | 33,214 | 24,202 | — | ||||||||||||
Net asset value per share | $ | 12.80 | $ | 11.32 | $ | 11.27 | $ | — |
The accompanying notes are an integral part of these financial statements.
93
Statements of Operations
For the Six Months Ended December 31, 2017 (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 | $ | 3,928,084 | $ | 2,837,448 | $ | 1,522,290 | $ | 1,663,227 | ||||||||
Less: foreign taxes withheld | — | (13,732 | ) | (12,941 | ) | (26,442 | ) | |||||||||
Interest Income | 214,530 | 73,154 | 21,460 | 85,206 | ||||||||||||
Total investment income | 4,142,614 | 2,896,870 | 1,530,809 | 1,721,991 | ||||||||||||
EXPENSES | ||||||||||||||||
Investment advisory fees (Note 3) | 5,592,261 | 1,310,541 | 351,635 | 1,407,047 | ||||||||||||
Service fees – Investor Shares (Note 3) | 1,171,386 | 242,447 | 63,360 | 31,743 | ||||||||||||
Business management fees | 466,022 | 109,212 | 29,303 | 117,254 | ||||||||||||
Administration, accounting and transfer agent fees | 351,041 | 83,438 | 22,387 | 89,582 | ||||||||||||
Miscellaneous expenses | 71,579 | 13,009 | 5,872 | 23,233 | ||||||||||||
Professional fees | 62,084 | 22,293 | 13,398 | 23,084 | ||||||||||||
Trustee fees | 43,879 | 10,406 | 2,806 | 10,944 | ||||||||||||
Registration fees | 38,598 | 20,202 | 19,770 | 28,420 | ||||||||||||
Custodian fees | 28,399 | 6,982 | 2,169 | 7,277 | ||||||||||||
Insurance fees | 15,025 | 3,510 | 969 | 3,592 | ||||||||||||
Distribution fees – Advisor Shares (Note 3) | 7,235 | 7,540 | 3,149 | 224,240 | ||||||||||||
Service fees – Advisor Shares (Note 3) | 4,341 | 4,524 | 1,890 | 134,544 | ||||||||||||
Total Expenses | 7,851,850 | 1,834,104 | 516,708 | 2,100,960 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | (3,709,236 | ) | 1,062,766 | 1,014,101 | (378,969 | ) | ||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||
Net realized gain (loss) on investments | 62,987,220 | 234,352 | 1,098,749 | 11,356,221 | ||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments | 167,002,457 | 50,416,622 | 9,148,471 | 40,957,784 | ||||||||||||
Foreign receivables | — | (89 | ) | — | — | |||||||||||
Net change in unrealized appreciation (depreciation) | 167,002,457 | 50,416,533 | 9,148,471 | 40,957,784 | ||||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 229,989,677 | 50,650,885 | 10,247,220 | 52,314,005 | ||||||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | 226,280,441 | $ | 51,713,651 | $ | 11,261,321 | $ | 51,935,036 |
The accompanying notes are an integral part of these financial statements.
94
Statements of Operations
For the Six Months Ended December 31, 2017 (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 | $ | 3,616 | $ | 1,421,073 | $ | 10,407,205 | $ | 177,513 | ||||||||
Less: foreign taxes withheld | (12 | ) | (16,876 | ) | — | (3,275 | ) | |||||||||
Interest Income | 1,008 | 271,803 | 257,233 | 6,091 | ||||||||||||
Total investment income | 4,612 | 1,676,000 | 10,664,438 | 180,329 | ||||||||||||
EXPENSES | ||||||||||||||||
Investment advisory fees (Note 3) | 4,418 | 2,858,638 | 5,353,323 | 145,054 | ||||||||||||
Service fees – Investor Shares (Note 3) | 1,020 | 275,211 | 649,998 | 33,474 | ||||||||||||
Business management fees | 340 | 168,155 | 314,901 | 11,158 | ||||||||||||
Administration, accounting and transfer agent fees | 703 | 128,471 | 235,585 | 10,273 | ||||||||||||
Miscellaneous expenses | 2,569 | 42,739 | 59,652 | 7,318 | ||||||||||||
Registration fees | 6,291 | 39,288 | 24,000 | 12,333 | ||||||||||||
Distribution fees – Advisor Shares (Note 3) | — | 30,582 | 31,135 | — | ||||||||||||
Professional fees | 4,299 | 29,161 | 45,733 | 11,352 | ||||||||||||
Service fees – Advisor Shares (Note 3) | — | 18,349 | 18,681 | — | ||||||||||||
Trustee fees | 247 | 15,680 | 30,421 | 1,029 | ||||||||||||
Custodian fees | 3,740 | 11,791 | 19,412 | 15,688 | ||||||||||||
Insurance fees | 50 | 4,377 | 10,040 | 322 | ||||||||||||
Total Expenses | 23,677 | 3,622,442 | 6,792,881 | 248,001 | ||||||||||||
Expenses waived by adviser – expense cap (Note 3) | (17,899 | ) | — | — | (58,314 | ) | ||||||||||
Net Expenses | 5,778 | 3,622,442 | 6,792,881 | 189,687 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | (1,166 | ) | (1,946,442 | ) | 3,871,557 | (9,358 | ) | |||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||
Net realized gain (loss) on investments | (3,089 | ) | 6,607,544 | 30,012,996 | 313,311 | |||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments | 86,837 | 42,028,444 | 79,441,235 | 5,294,577 | ||||||||||||
Foreign receivables | — | — | — | 12,531 | ||||||||||||
Net change in unrealized appreciation (depreciation) | 86,837 | 42,028,444 | 79,441,235 | 5,307,108 | ||||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 83,748 | 48,635,988 | 109,454,231 | 5,620,419 | ||||||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | 82,582 | $ | 46,689,546 | $ | 113,325,788 | $ | 5,611,061 |
* Commenced operations October 2, 2017. The information presented is for the period from October 2, 2017 to December 31, 2017.
The accompanying notes are an integral part of these financial statements.
95
Statements of Operations
For the Six Months Ended December 31, 2017 (Unaudited)
BROWN | BROWN | BROWN | ||||||||||
ADVISORY | ADVISORY | ADVISORY | ||||||||||
INTERMEDIATE | TOTAL | STRATEGIC | ||||||||||
INCOME | RETURN | BOND | ||||||||||
FUND | FUND | FUND | ||||||||||
INVESTMENT INCOME | ||||||||||||
Dividend income – unaffiliated | $ | — | $ | — | $ | 159,695 | ||||||
Dividend income – affiliated (Note 3) | 328,722 | — | — | |||||||||
Interest Income | 1,390,784 | 1,741,660 | 1,905,930 | |||||||||
Total investment income | 1,719,506 | 1,741,660 | 2,065,625 | |||||||||
EXPENSES | ||||||||||||
Investment advisory fees (Note 3) | 206,102 | 171,739 | 245,076 | |||||||||
Administration, accounting and transfer agent fees | 34,829 | 45,635 | 67,747 | |||||||||
Business management fees | 34,350 | 28,623 | 30,634 | |||||||||
Service fees – Investor Shares (Note 3) | 33,323 | 743 | 30,579 | |||||||||
Registration fees | 17,307 | 16,801 | 17,769 | |||||||||
Professional fees | 13,976 | 13,325 | 13,614 | |||||||||
Miscellaneous expenses | 5,370 | 4,627 | 6,057 | |||||||||
Distribution fees – Advisor Shares (Note 3) | 5,137 | — | 279 | |||||||||
Custodian fees | 3,479 | 4,121 | 6,304 | |||||||||
Trustee fees | 3,298 | 2,754 | 2,902 | |||||||||
Insurance fees | 1,170 | 914 | 949 | |||||||||
Service fees – Advisor Shares (Note 3) | 1,027 | — | 56 | |||||||||
Total Expenses | 359,368 | 289,282 | 421,966 | |||||||||
Expenses waived by adviser – investments in affiliates (Note 3) | (44,870 | ) | — | — | ||||||||
Previously waived expenses recovered by adviser (Note 3) | — | — | 7,195 | |||||||||
Net Expenses | 314,498 | 289,282 | 429,161 | |||||||||
NET INVESTMENT INCOME (LOSS) | 1,405,008 | 1,452,378 | 1,636,464 | |||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||
Net realized gain (loss) on: | ||||||||||||
Investments – unaffiliated | (17,665 | ) | 166,167 | (26,687 | ) | |||||||
Capital gain distribution from other RIC | — | — | 10 | |||||||||
Futures contracts (Note 6) | — | 392,274 | 125,776 | |||||||||
Net realized gain (loss) | (17,665 | ) | 558,441 | 99,099 | ||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||
Investments – unaffiliated | (338,164 | ) | 63,703 | 106,579 | ||||||||
Investments – affiliated (Note 3) | (59,903 | ) | — | — | ||||||||
Futures contracts (Note 6) | — | (51,011 | ) | 20,330 | ||||||||
Net change in unrealized appreciation (depreciation) | (398,067 | ) | 12,692 | 126,909 | ||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (415,732 | ) | 571,133 | 226,008 | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | 989,276 | $ | 2,023,511 | $ | 1,862,472 |
The accompanying notes are an integral part of these financial statements.
96
Statements of Operations
For the Six Months Ended December 31, 2017 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY | ADVISORY | ADVISORY | ADVISORY | |||||||||||||
SUSTAINABLE | MARYLAND | TAX EXEMPT | MORTGAGE | |||||||||||||
BOND | BOND | BOND | SECURITIES | |||||||||||||
FUND* | FUND | FUND | FUND | |||||||||||||
INVESTMENT INCOME | ||||||||||||||||
Dividend income | $ | — | $ | — | $ | — | $ | 14,531 | ||||||||
Interest Income | 134,364 | 2,600,106 | 5,082,410 | 3,644,469 | ||||||||||||
Total investment income | 134,364 | 2,600,106 | 5,082,410 | 3,659,000 | ||||||||||||
EXPENSES | ||||||||||||||||
Investment advisory fees (Note 3) | 16,113 | 278,624 | 425,067 | 520,783 | ||||||||||||
Miscellaneous expenses | 10,827 | 4,990 | 7,330 | 11,628 | ||||||||||||
Registration fees | 10,138 | 2,703 | 12,869 | 16,386 | ||||||||||||
Administration, accounting and transfer agent fees | 9,306 | 45,370 | 67,191 | 142,397 | ||||||||||||
Professional fees | 5,868 | 15,267 | 18,033 | 19,896 | ||||||||||||
Service fees – Investor Shares (Note 3) | 2,686 | 46,437 | 70,845 | 137 | ||||||||||||
Business management fees | 2,686 | 46,437 | 70,845 | 86,797 | ||||||||||||
Custody fees | 1,468 | 2,854 | 4,040 | 21,867 | ||||||||||||
Trustee fees | 276 | 4,445 | 6,642 | 8,276 | ||||||||||||
Insurance fees | 67 | 1,529 | 2,160 | 2,962 | ||||||||||||
Total Expenses | 59,435 | 448,656 | 685,022 | 831,129 | ||||||||||||
Expenses waived by adviser – expense cap (Note 3) | (27,208 | ) | — | — | — | |||||||||||
Net Expenses | 32,227 | 448,656 | 685,022 | 831,129 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | 102,137 | 2,151,450 | 4,397,388 | 2,827,871 | ||||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||
Investments | (33,698 | ) | 10,682 | (108,282 | ) | 670,915 | ||||||||||
Futures contracts (Note 6) | 22,160 | — | — | (329,377 | ) | |||||||||||
Net realized gain (loss) | (11,538 | ) | 10,682 | (108,282 | ) | 341,538 | ||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments | (58,958 | ) | (351,342 | ) | 1,465,570 | 46,384 | ||||||||||
Futures contracts (Note 6) | 9,605 | — | — | 90,810 | ||||||||||||
Net change in unrealized appreciation (depreciation) | (49,353 | ) | (351,342 | ) | 1,465,570 | 137,194 | ||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | (60,891 | ) | (340,660 | ) | 1,357,288 | 478,732 | ||||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | 41,246 | $ | 1,810,790 | $ | 5,754,676 | $ | 3,306,603 |
* Commenced operations August 7, 2017. Information presented is for the period from August 7, 2017 to December 31, 2017.
The accompanying notes are an integral part of these financial statements.
97
Statements of Operations
For the Six Months Ended December 31, 2017 (Unaudited)
BROWN | BROWN | BROWN | BROWN | |||||||||||||
ADVISORY – | ADVISORY – | ADVISORY – | ADVISORY – | |||||||||||||
WMC | WMC | SOMERSET | MACQUARIE | |||||||||||||
STRATEGIC | JAPAN ALPHA | EMERGING | ASIA | |||||||||||||
EUROPEAN | OPPORTUNITIES | MARKETS | NEW STARS | |||||||||||||
EQUITY FUND | FUND | FUND | FUND | |||||||||||||
INVESTMENT INCOME | ||||||||||||||||
Dividend income | $ | 5,028,460 | $ | 8,987,765 | $ | 6,353,285 | $ | 2,860,713 | ||||||||
Less: foreign taxes withheld | (356,357 | ) | (898,858 | ) | (900,077 | ) | (300,327 | ) | ||||||||
Interest Income | 108,481 | 264,963 | 136,684 | 43,602 | ||||||||||||
Total investment income | 4,780,584 | 8,353,870 | 5,589,892 | 2,603,988 | ||||||||||||
EXPENSES | ||||||||||||||||
Investment advisory fees (Note 3) | 5,735,011 | 5,333,729 | 2,915,661 | 1,656,083 | ||||||||||||
Business management fees | 318,612 | 266,686 | 161,981 | 66,243 | ||||||||||||
Administration, accounting and transfer agent fees | 243,419 | 221,748 | 125,161 | 50,710 | ||||||||||||
Miscellaneous expenses | 218,402 | 174,784 | 27,043 | 16,101 | ||||||||||||
Custodian fees | 186,703 | 151,539 | 407,629 | 154,581 | ||||||||||||
Professional fees | 46,220 | 39,589 | 28,176 | 17,562 | ||||||||||||
Registration fees | 40,755 | 37,455 | 30,372 | 19,873 | ||||||||||||
Trustee fees | 30,335 | 23,620 | 15,325 | 6,226 | ||||||||||||
Distribution fees – Advisor Shares (Note 3) | 19,722 | 478 | 344 | — | ||||||||||||
Service fees – Advisor Shares (Note 3) | 11,833 | 287 | 206 | — | ||||||||||||
Insurance fees | 9,935 | 8,150 | 4,901 | 2,028 | ||||||||||||
Service fees – Investor Shares (Note 3) | 7,739 | 2,258 | 143,961 | 2,299 | ||||||||||||
Interest expense on line of credit (Note 7) | — | — | — | 114 | ||||||||||||
Total Expenses | 6,868,686 | 6,260,323 | 3,860,760 | 1,991,820 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | (2,088,102 | ) | 2,093,547 | 1,729,132 | 612,168 | |||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||
Investments | 34,933,860 | 79,123,547 | 2,351,701 | 10,836,559 | ||||||||||||
Less: foreign capital gains taxes paid | — | — | — | (168,724 | ) | |||||||||||
Futures contracts (Note 6) | — | 1,990,246 | — | — | ||||||||||||
Net realized gain (loss) | 34,933,860 | 81,113,793 | 2,351,701 | 10,667,835 | ||||||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments | 63,648,182 | 57,640,571 | 64,902,631 | 15,687,955 | ||||||||||||
Futures contracts (Note 6) | — | 509,832 | — | — | ||||||||||||
Foreign currency/receivables | (3,839 | ) | 23,369 | 2,704 | 2,646 | |||||||||||
Net change in unrealized appreciation (depreciation) | 63,644,343 | 58,173,772 | 64,905,335 | 15,690,601 | ||||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | 98,578,203 | 139,287,565 | 67,257,036 | 26,358,436 | ||||||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | $ | 96,490,101 | $ | 141,381,112 | $ | 68,986,168 | $ | 26,970,604 |
The accompanying notes are an integral part of these financial statements.
98
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 | |||||||||||||
2017 | June 30, | 2017 | June 30, | |||||||||||||
(Unaudited) | 2017 | (Unaudited) | 2017 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | (3,709,236 | ) | $ | (5,558,657 | ) | $ | 1,062,766 | $ | 1,796,492 | ||||||
Net realized gain (loss) | 62,987,220 | 237,349,413 | 234,352 | 9,225,463 | ||||||||||||
Net change in unrealized appreciation (depreciation) | 167,002,457 | 2,508,322 | 50,416,533 | 65,792,893 | ||||||||||||
Increase (Decrease) in Net Assets from Operations | 226,280,441 | 234,299,078 | 51,713,651 | 76,814,848 | ||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Shares | — | — | (643,925 | ) | (296,958 | ) | ||||||||||
Investor Shares | — | — | (1,422,429 | ) | (1,264,674 | ) | ||||||||||
Advisor Shares | — | — | (9,268 | ) | (11,536 | ) | ||||||||||
Net realized gain: | ||||||||||||||||
Institutional Shares | (23,141,509 | ) | (21,177,151 | ) | — | — | ||||||||||
Investor Shares | (120,504,686 | ) | (123,877,317 | ) | — | — | ||||||||||
Advisor Shares | (469,496 | ) | (2,370,151 | ) | — | — | ||||||||||
Total Distributions to Shareholders | (144,115,691 | ) | (147,424,619 | ) | (2,075,622 | ) | (1,573,168 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 28,678,697 | 119,319,112 | 4,677,867 | 81,914,255 | ||||||||||||
Investor Shares | 103,876,337 | 211,845,143 | 13,173,842 | 32,256,785 | ||||||||||||
Advisor Shares | 182,313 | 2,984,886 | 117,335 | 541,315 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 18,263,760 | 17,528,304 | 294,182 | 116,213 | ||||||||||||
Investor Shares | 113,405,413 | 116,018,940 | 278,371 | 330,267 | ||||||||||||
Advisor Shares | 435,592 | 2,309,631 | 8,519 | 10,376 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (52,425,477 | ) | (126,100,789 | ) | (4,863,131 | ) | (16,178,545 | ) | ||||||||
Investor Shares | (181,154,332 | ) | (834,155,207 | ) | (25,369,226 | ) | (133,656,620 | ) | ||||||||
Advisor Shares | (414,207 | ) | (33,588,840 | ) | (466,318 | ) | (4,314,983 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | 8 | 3 | 456 | ||||||||||||
Investor Shares | 742 | 522 | — | 904 | ||||||||||||
Advisor Shares | 12 | 671 | — | 6 | ||||||||||||
Shares issued in connection with the acquisition of | ||||||||||||||||
the Brown Advisory Value Equity Fund (Note 9): | ||||||||||||||||
Institutional Shares | N/A | N/A | N/A | 1,202,936 | ||||||||||||
Investor Shares | N/A | N/A | N/A | 41,538,801 | ||||||||||||
Advisor Shares | N/A | N/A | N/A | 992,710 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 30,848,850 | (523,837,619 | ) | (12,148,556 | ) | 4,754,876 | ||||||||||
Increase (Decrease) in Net Assets | 113,013,600 | (436,963,160 | ) | 37,489,473 | 79,996,556 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 1,766,453,786 | 2,203,416,946 | 417,633,414 | 337,636,858 | ||||||||||||
End of period | $ | 1,879,467,386 | $ | 1,766,453,786 | $ | 455,122,887 | $ | 417,633,414 | ||||||||
Undistributed (Accumulated) net investment income (loss) | $ | (4,557,557 | ) | $ | (848,321 | ) | $ | 18,901 | $ | 1,031,757 | ||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 1,343,291 | 6,213,516 | 237,265 | 4,821,892 | ||||||||||||
Investor Shares | 4,917,213 | 11,129,360 | 674,468 | 1,894,148 | ||||||||||||
Advisor Shares | 8,853 | 166,276 | 6,164 | 31,755 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 865,992 | 998,195 | 14,123 | 7,005 | ||||||||||||
Investor Shares | 5,423,501 | 6,652,462 | 13,383 | 19,920 | ||||||||||||
Advisor Shares | 21,867 | 138,218 | 409 | 625 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (2,460,361 | ) | (6,642,253 | ) | (249,239 | ) | (1,013,033 | ) | ||||||||
Investor Shares | (8,581,903 | ) | (43,687,505 | ) | (1,301,496 | ) | (7,908,695 | ) | ||||||||
Advisor Shares | (20,504 | ) | (1,831,432 | ) | (24,041 | ) | (250,475 | ) | ||||||||
Shares issued in connection with teth acquisition of | ||||||||||||||||
the Brown Advisory Value Equity Fund (Note 9): | ||||||||||||||||
Institutional Shares | N/A | N/A | N/A | 72,612 | ||||||||||||
Investor Shares | N/A | N/A | N/A | 2,509,981 | ||||||||||||
Advisor Shares | N/A | N/A | N/A | 59,882 | ||||||||||||
Increase (Decrease) in shares outstanding | 1,517,949 | (26,863,163 | ) | (628,964 | ) | 245,617 |
The accompanying notes are an integral part of these financial statements.
99
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 | |||||||||||||
2017 | June 30, | 2017 | June 30, | |||||||||||||
(Unaudited) | 2017 | (Unaudited) | 2017 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 1,014,101 | $ | 2,130,205 | $ | (378,969 | ) | $ | (1,164,258 | ) | ||||||
Net realized gain (loss) | 1,098,749 | 7,663,911 | 11,356,221 | 19,653,792 | ||||||||||||
Net change in unrealized appreciation (depreciation) | 9,148,471 | 4,432,257 | 40,957,784 | 45,736,422 | ||||||||||||
Increase (Decrease) in Net Assets from Operations | 11,261,321 | 14,226,373 | 51,935,036 | 64,225,956 | ||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Shares | (286,879 | ) | (300,565 | ) | — | — | ||||||||||
Investor Shares | (739,126 | ) | (1,754,976 | ) | — | — | ||||||||||
Advisor Shares | (19,348 | ) | (45,555 | ) | — | — | ||||||||||
Net realized gain: | ||||||||||||||||
Institutional Shares | (916,839 | ) | (408,109 | ) | (4,421,769 | ) | (1,045,872 | ) | ||||||||
Investor Shares | (2,572,585 | ) | (3,601,920 | ) | (802,354 | ) | (198,697 | ) | ||||||||
Advisor Shares | (78,544 | ) | (110,477 | ) | (3,143,772 | ) | (1,263,054 | ) | ||||||||
Total Distributions to Shareholders | (4,613,321 | ) | (6,221,602 | ) | (8,367,895 | ) | (2,507,623 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 1,097,169 | 30,529,529 | 30,952,072 | 100,732,392 | ||||||||||||
Investor Shares | 1,061,873 | 5,936,447 | 9,990,369 | 28,660,628 | ||||||||||||
Advisor Shares | 6,238 | 4,735 | 7,435,195 | 31,487,091 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 956,670 | 533,195 | 3,046,077 | 743,538 | ||||||||||||
Investor Shares | 1,315,003 | 2,223,909 | 658,241 | 175,109 | ||||||||||||
Advisor Shares | 94,086 | 145,768 | 2,961,244 | 1,188,453 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (2,766,156 | ) | (16,718,684 | ) | (13,611,818 | ) | (29,877,900 | ) | ||||||||
Investor Shares | (4,917,108 | ) | (44,793,123 | ) | (2,518,028 | ) | (22,743,144 | ) | ||||||||
Advisor Shares | (38,601 | ) | (903,287 | ) | (14,907,575 | ) | (91,353,897 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | — | — | 201 | ||||||||||||
Investor Shares | — | — | — | 1,047 | ||||||||||||
Advisor Shares | — | 1 | 601 | 370 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | (3,190,826 | ) | (23,041,510 | ) | 24,006,378 | 19,013,888 | ||||||||||
Increase (Decrease) in Net Assets | 3,457,174 | (15,036,739 | ) | 67,573,519 | 80,732,221 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 113,899,084 | 128,935,823 | 430,143,186 | 349,410,965 | ||||||||||||
End of period | $ | 117,356,258 | $ | 113,899,084 | $ | 497,716,705 | $ | 430,143,186 | ||||||||
Undistributed (Accumulated) net investment income (loss) | $ | 36,504 | $ | 67,756 | $ | (847,895 | ) | $ | (468,926 | ) | ||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 77,118 | 2,320,504 | 1,555,852 | 5,731,486 | ||||||||||||
Investor Shares | 75,575 | 453,386 | 497,816 | 1,664,640 | ||||||||||||
Advisor Shares | 427 | 354 | 380,551 | 1,881,748 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 65,255 | 40,657 | 144,982 | 44,075 | ||||||||||||
Investor Shares | 89,512 | 171,641 | 31,616 | 10,461 | ||||||||||||
Advisor Shares | 6,433 | 11,225 | 144,240 | 71,766 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (194,604 | ) | (1,292,954 | ) | (677,549 | ) | (1,697,204 | ) | ||||||||
Investor Shares | (341,046 | ) | (3,407,417 | ) | (127,152 | ) | (1,317,790 | ) | ||||||||
Advisor Shares | (2,745 | ) | (67,821 | ) | (767,663 | ) | (5,459,074 | ) | ||||||||
Increase (Decrease) in shares outstanding | (224,075 | ) | (1,770,425 | ) | 1,182,693 | 930,108 |
The accompanying notes are an integral part of these financial statements.
100
Statements of Changes in Net Assets
BROWN ADVISORY | ||||||||||||
MID-CAP GROWTH | BROWN ADVISORY | |||||||||||
FUND | SMALL-CAP GROWTH FUND | |||||||||||
Period Ended | Six Months Ended | Fiscal | ||||||||||
December 31, | December 31, | Year Ended | ||||||||||
2017* | 2017 | June 30, | ||||||||||
(Unaudited) | (Unaudited) | 2017 | ||||||||||
OPERATIONS | ||||||||||||
Net investment income (loss) | $ | (1,166 | ) | $ | (1,946,442 | ) | $ | (2,625,257 | ) | |||
Net realized gain (loss) | (3,089 | ) | 6,607,544 | 12,097,018 | ||||||||
Net change in unrealized appreciation (depreciation) | 86,837 | 42,028,444 | 51,670,727 | |||||||||
Increase (Decrease) in Net Assets from Operations | 82,582 | 46,689,546 | 61,142,488 | |||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||
Net investment income: | ||||||||||||
Institutional Shares | — | (1,427,349 | ) | — | ||||||||
Investor Shares | — | (1,204,104 | ) | — | ||||||||
Advisor Shares | — | (25,859 | ) | — | ||||||||
Net realized gain: | ||||||||||||
Institutional Shares | — | (4,901,077 | ) | (3,125,896 | ) | |||||||
Investor Shares | — | (5,113,684 | ) | (9,911,936 | ) | |||||||
Advisor Shares | — | (261,389 | ) | (1,153,765 | ) | |||||||
Total Distributions to Shareholders | — | (12,933,462 | ) | (14,191,597 | ) | |||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||
Sale of shares: | ||||||||||||
Institutional Shares | — | 199,288,624 | 153,338,783 | |||||||||
Investor Shares | 9,055,090 | 41,746,791 | 87,942,206 | |||||||||
Advisor Shares | — | 1,568,711 | 34,620,167 | |||||||||
Reinvestment of distributions: | ||||||||||||
Institutional Shares | — | 5,632,851 | 2,803,928 | |||||||||
Investor Shares | — | 3,636,950 | 6,192,098 | |||||||||
Advisor Shares | — | 199,271 | 804,864 | |||||||||
Redemption of shares: | ||||||||||||
Institutional Shares | — | (17,602,155 | ) | (16,925,963 | ) | |||||||
Investor Shares | (8,958 | ) | (19,119,467 | ) | (62,439,748 | ) | ||||||
Advisor Shares | — | (16,802,387 | ) | (14,767,401 | ) | |||||||
Redemption fees: | ||||||||||||
Institutional Shares | — | 8,553 | 239 | |||||||||
Investor Shares | — | — | 38 | |||||||||
Advisor Shares | — | 99 | 912 | |||||||||
Increase (Decrease) from Capital Share Transactions | 9,046,132 | 198,557,841 | 191,570,123 | |||||||||
Increase (Decrease) in Net Assets | 9,128,714 | 232,313,925 | 238,521,014 | |||||||||
NET ASSETS | ||||||||||||
Beginning of period | — | 533,652,097 | 295,131,083 | |||||||||
End of period | $ | 9,128,714 | $ | 765,966,022 | $ | 533,652,097 | ||||||
Undistributed (Accumulated) net investment income (loss) | $ | (1,166 | ) | $ | (6,069,821 | ) | $ | (1,466,067 | ) | |||
SHARE TRANSACTIONS | ||||||||||||
Sale of shares: | ||||||||||||
Institutional Shares | — | 5,508,972 | 4,584,294 | |||||||||
Investor Shares | 889,281 | 2,288,975 | 5,239,278 | |||||||||
Advisor Shares | — | 90,032 | 2,170,147 | |||||||||
Reinvestment of distributions: | ||||||||||||
Institutional Shares | — | 150,581 | 85,694 | |||||||||
Investor Shares | — | 194,006 | 377,337 | |||||||||
Advisor Shares | — | 11,119 | 51,200 | |||||||||
Redemption of shares: | ||||||||||||
Institutional Shares | — | (478,986 | ) | (504,564 | ) | |||||||
Investor Shares | (870 | ) | (1,038,954 | ) | (3,732,469 | ) | ||||||
Advisor Shares | — | (977,784 | ) | (918,376 | ) | |||||||
Increase (Decrease) in shares outstanding | 888,411 | 5,747,961 | 7,352,541 |
* Commenced operations October 2, 2017. The information presented is for the period from October 2, 2017 to December 31, 2017.
The accompanying notes are an integral part of these financial statements.
101
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 | |||||||||||||
2017 | June 30, | 2017 | June 30, | |||||||||||||
(Unaudited) | 2017 | (Unaudited) | 2017 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 3,871,557 | $ | 6,232,823 | $ | (9,358 | ) | $ | 123,094 | |||||||
Net realized gain (loss) | 30,012,996 | 33,184,360 | 313,311 | (697,183 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) | 79,441,235 | 158,498,930 | 5,307,108 | 6,298,725 | ||||||||||||
Increase (Decrease) in Net Assets from Operations | 113,325,788 | 197,916,113 | 5,611,061 | 5,724,636 | ||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Shares | (2,681,377 | ) | (988,540 | ) | — | — | ||||||||||
Investor Shares | (4,805,086 | ) | (1,873,774 | ) | (43,629 | ) | (53,915 | ) | ||||||||
Advisor Shares | (62,036 | ) | — | — | — | |||||||||||
Net realized gain: | ||||||||||||||||
Institutional Shares | (13,597,047 | ) | (334,931 | ) | — | — | ||||||||||
Investor Shares | (30,834,877 | ) | (1,026,309 | ) | — | — | ||||||||||
Advisor Shares | (858,046 | ) | (71,853 | ) | — | — | ||||||||||
Total Distributions to Shareholders | (52,838,469 | ) | (4,295,407 | ) | (43,629 | ) | (53,915 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 48,984,342 | 179,876,139 | — | — | ||||||||||||
Investor Shares | 70,888,987 | 150,643,608 | 8,747,083 | 10,428,188 | ||||||||||||
Advisor Shares | 1,479,256 | 4,622,183 | — | — | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 11,905,500 | 1,028,123 | — | — | ||||||||||||
Investor Shares | 21,281,850 | 1,463,959 | 19,204 | 27,050 | ||||||||||||
Advisor Shares | 890,719 | 70,862 | — | — | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (26,995,235 | ) | (39,625,716 | ) | — | — | ||||||||||
Investor Shares | (82,356,718 | ) | (233,263,118 | ) | (1,582,885 | ) | (3,139,577 | ) | ||||||||
Advisor Shares | (3,793,015 | ) | (41,744,149 | ) | — | — | ||||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | 1 | 596 | — | — | ||||||||||||
Investor Shares | 2 | 293 | — | — | ||||||||||||
Advisor Shares | 30 | 17 | — | — | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 42,285,719 | 23,072,797 | 7,183,402 | 7,315,661 | ||||||||||||
Increase (Decrease) in Net Assets | 102,773,038 | 216,693,503 | 12,750,834 | 12,986,382 | ||||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 1,200,328,511 | 983,635,008 | 39,353,773 | 26,367,391 | ||||||||||||
End of period | $ | 1,303,101,549 | $ | 1,200,328,511 | $ | 52,104,607 | $ | 39,353,773 | ||||||||
Undistributed (Accumulated) net investment income (loss) | $ | 782,332 | $ | 4,459,274 | $ | (16,566 | ) | $ | 36,421 | |||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 1,739,188 | 7,218,027 | — | — | ||||||||||||
Investor Shares | 2,541,539 | 5,983,204 | 697,232 | 997,773 | ||||||||||||
Advisor Shares | 52,836 | 186,049 | — | — | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 416,156 | 38,734 | — | — | ||||||||||||
Investor Shares | 744,917 | 55,176 | 1,474 | 2,772 | ||||||||||||
Advisor Shares | 31,366 | 2,683 | — | — | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (959,928 | ) | (1,544,437 | ) | — | — | ||||||||||
Investor Shares | (2,925,841 | ) | (9,311,268 | ) | (127,703 | ) | (308,305 | ) | ||||||||
Advisor Shares | (135,679 | ) | (1,599,518 | ) | — | — | ||||||||||
Increase (Decrease) in shares outstanding | 1,504,554 | 1,028,650 | 571,003 | 692,240 |
The accompanying notes are an integral part of these financial statements.
102
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 | |||||||||||||
2017 | June 30, | 2017 | June 30, | |||||||||||||
(Unaudited) | 2017 | (Unaudited) | 2017 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 1,405,008 | $ | 2,678,957 | $ | 1,452,378 | $ | 2,300,033 | ||||||||
Net realized gain (loss) | (17,665 | ) | 1,158,501 | 558,441 | 233,570 | |||||||||||
Net change in unrealized appreciation (depreciation) | (398,067 | ) | (3,387,615 | ) | 12,692 | (1,459,774 | ) | |||||||||
Increase (Decrease) in Net Assets from Operations | 989,276 | 449,843 | 2,023,511 | 1,073,829 | ||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Shares | — | — | (1,440,609 | ) | (2,343,658 | ) | ||||||||||
Investor Shares | (1,267,804 | ) | (2,831,381 | ) | (38,176 | ) | (80,256 | ) | ||||||||
Advisor Shares | (34,814 | ) | (140,836 | ) | — | — | ||||||||||
Net realized gain: | ||||||||||||||||
Institutional Shares | — | — | — | (98,534 | ) | |||||||||||
Investor Shares | — | — | — | (3,277 | ) | |||||||||||
Advisor Shares | — | — | — | — | ||||||||||||
Total Distributions to Shareholders | (1,302,618 | ) | (2,972,217 | ) | (1,478,785 | ) | (2,525,725 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | — | — | 18,476,263 | 49,027,136 | ||||||||||||
Investor Shares | 10,230,810 | 25,077,370 | 554,151 | 3,462,904 | ||||||||||||
Advisor Shares | 2,564 | 38,794 | — | — | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | — | — | 392,130 | 612,556 | ||||||||||||
Investor Shares | 317,618 | 724,852 | 24,235 | 60,281 | ||||||||||||
Advisor Shares | 19,148 | 86,263 | — | — | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | — | — | (13,817,055 | ) | (24,464,517 | ) | ||||||||||
Investor Shares | (10,822,598 | ) | (29,404,931 | ) | (49,818 | ) | (2,704,739 | ) | ||||||||
Advisor Shares | (177,846 | ) | (4,833,940 | ) | — | — | ||||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | — | — | 99 | ||||||||||||
Investor Shares | — | — | — | — | ||||||||||||
Advisor Shares | — | — | — | — | ||||||||||||
Increase (Decrease) from Capital Share Transactions | (430,304 | ) | (8,311,592 | ) | 5,579,906 | 25,993,720 | ||||||||||
Increase (Decrease) in Net Assets | (743,646 | ) | (10,833,966 | ) | 6,124,632 | 24,541,824 | ||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 136,038,456 | 146,872,422 | 110,353,484 | 85,811,660 | ||||||||||||
End of period | $ | 135,294,810 | $ | 136,038,456 | $ | 116,478,116 | $ | 110,353,484 | ||||||||
Undistributed (Accumulated) net investment income (loss) | $ | (66,635 | ) | $ | (169,025 | ) | $ | (22,178 | ) | $ | 4,229 | |||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | — | — | 1,838,414 | 4,910,349 | ||||||||||||
Investor Shares | 963,749 | 2,357,775 | 55,083 | 341,146 | ||||||||||||
Advisor Shares | 247 | 3,759 | — | — | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | — | — | 39,048 | 61,510 | ||||||||||||
Investor Shares | 29,918 | 68,181 | 2,413 | 6,013 | ||||||||||||
Advisor Shares | 1,841 | 8,282 | — | — | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | — | — | (1,374,164 | ) | (2,439,943 | ) | ||||||||||
Investor Shares | (1,018,882 | ) | (2,768,529 | ) | (4,965 | ) | (272,638 | ) | ||||||||
Advisor Shares | (17,157 | ) | (466,686 | ) | — | — | ||||||||||
Increase (Decrease) in shares outstanding | (40,284 | ) | (797,218 | ) | 555,829 | 2,606,437 |
The accompanying notes are an integral part of these financial statements.
103
Statements of Changes in Net Assets
BROWN ADVISORY | ||||||||||||
BROWN ADVISORY | SUSTAINABLE | |||||||||||
STRATEGIC BOND FUND | BOND FUND | |||||||||||
Six Months Ended | Fiscal | Period Ended | ||||||||||
December 31, | Year Ended | December 31, | ||||||||||
2017 | June 30, | 2017* | ||||||||||
(Unaudited) | 2017 | (Unaudited) | ||||||||||
OPERATIONS | ||||||||||||
Net investment income (loss) | $ | 1,636,464 | $ | 1,599,614 | $ | 102,137 | ||||||
Net realized gain (loss) | 99,099 | 210,713 | (11,538 | ) | ||||||||
Net change in unrealized appreciation (depreciation) | 126,909 | 723,724 | (49,353 | ) | ||||||||
Increase (Decrease) in Net Assets from Operations | 1,862,472 | 2,534,051 | 41,246 | |||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||
Net investment income: | ||||||||||||
Investor Shares | (1,718,065 | ) | (1,644,060 | ) | (102,614 | ) | ||||||
Advisor Shares | (2,754 | ) | (14,139 | ) | — | |||||||
Total Distributions to Shareholders | (1,720,819 | ) | (1,658,199 | ) | (102,614 | ) | ||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||
Sale of shares: | ||||||||||||
Investor Shares | 25,687,759 | 90,428,155 | 23,356,988 | |||||||||
Advisor Shares | 357 | 222,462 | — | |||||||||
Reinvestment of distributions: | ||||||||||||
Investor Shares | 328,809 | 288,868 | 14,278 | |||||||||
Advisor Shares | 2,750 | 13,108 | — | |||||||||
Redemption of shares: | ||||||||||||
Investor Shares | (14,386,293 | ) | (16,143,207 | ) | (399,903 | ) | ||||||
Advisor Shares | (40,830 | ) | (861,525 | ) | — | |||||||
Redemption fees: | ||||||||||||
Investor Shares | — | 25 | — | |||||||||
Advisor Shares | — | — | — | |||||||||
Increase (Decrease) from Capital Share Transactions | 11,592,552 | 73,947,886 | 22,971,363 | |||||||||
Increase (Decrease) in Net Assets | 11,734,205 | 74,823,738 | 22,909,995 | |||||||||
NET ASSETS | ||||||||||||
Beginning of period | 114,899,766 | 40,076,028 | — | |||||||||
End of period | $ | 126,633,971 | $ | 114,899,766 | $ | 22,909,995 | ||||||
Undistributed (Accumulated) net investment income (loss) | $ | (152,330 | ) | $ | (67,975 | ) | $ | (477 | ) | |||
SHARE TRANSACTIONS | ||||||||||||
Sale of shares: | ||||||||||||
Investor Shares | 2,667,731 | 9,446,682 | 2,339,640 | |||||||||
Advisor Shares | 37 | 23,202 | — | |||||||||
Reinvestment of distributions: | ||||||||||||
Investor Shares | 34,176 | 30,161 | 1,435 | |||||||||
Advisor Shares | 285 | 1,370 | — | |||||||||
Redemption of shares: | ||||||||||||
Investor Shares | (1,493,098 | ) | (1,682,618 | ) | (40,182 | ) | ||||||
Advisor Shares | (4,244 | ) | (89,988 | ) | — | |||||||
Increase (Decrease) in shares outstanding | 1,204,887 | 7,728,809 | 2,300,893 |
* Commenced operations August 7, 2017. Information presented is for the period from August 7, 2017 to December 31, 2017.
The accompanying notes are an integral part of these financial statements.
104
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 | |||||||||||||
2017 | June 30, | 2017 | June 30, | |||||||||||||
(Unaudited) | 2017 | (Unaudited) | 2017 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 2,151,450 | $ | 3,794,122 | $ | 4,397,388 | $ | 7,112,207 | ||||||||
Net realized gain (loss) | 10,682 | (80,218 | ) | (108,282 | ) | (1,333,781 | ) | |||||||||
Net change in unrealized appreciation (depreciation) | (351,342 | ) | (4,730,549 | ) | 1,465,570 | (6,441,873 | ) | |||||||||
Increase (Decrease) in Net Assets from Operations | 1,810,790 | (1,016,645 | ) | 5,754,676 | (663,447 | ) | ||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||||||
Net investment income: | ||||||||||||||||
Investor Shares | (2,151,447 | ) | (3,794,168 | ) | (4,397,257 | ) | (7,112,373 | ) | ||||||||
Net realized gain: | ||||||||||||||||
Investor Shares | — | (627,717 | ) | — | — | |||||||||||
Total Distributions to Shareholders | (2,151,447 | ) | (4,421,885 | ) | (4,397,257 | ) | (7,112,373 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Investor Shares | 16,717,614 | 99,282,076 | 74,804,919 | 141,861,579 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Investor Shares | 431,544 | 1,035,598 | 918,652 | 1,288,963 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Investor Shares | (12,496,644 | ) | (97,065,553 | ) | (22,883,993 | ) | (111,448,107 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Investor Shares | — | — | — | 200 | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 4,652,514 | 3,252,121 | 52,839,578 | 31,702,635 | ||||||||||||
Increase (Decrease) in Net Assets | 4,311,857 | (2,186,409 | ) | 54,196,997 | 23,926,815 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 181,518,367 | 183,704,776 | 257,602,141 | 233,675,326 | ||||||||||||
End of period | $ | 185,830,224 | $ | 181,518,367 | $ | 311,799,138 | $ | 257,602,141 | ||||||||
Undistributed (Accumulated) net investment income (loss) | $ | 63 | $ | 60 | $ | 15 | $ | (116 | ) | |||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Investor Shares | 1,571,021 | 9,426,718 | 7,500,147 | 14,282,097 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Investor Shares | 40,618 | 97,920 | 92,123 | 129,259 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Investor Shares | (1,175,772 | ) | (9,255,940 | ) | (2,294,313 | ) | (11,259,154 | ) | ||||||||
Increase (Decrease) in shares outstanding | 435,867 | 268,698 | 5,297,957 | 3,152,202 |
The accompanying notes are an integral part of these financial statements.
105
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 | |||||||||||||
2017 | June 30, | 2017 | June 30, | |||||||||||||
(Unaudited) | 2017 | (Unaudited) | 2017 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 2,827,871 | $ | 5,716,816 | $ | (2,088,102 | ) | $ | 11,698,240 | |||||||
Net realized gain (loss) | 341,538 | (2,985,711 | ) | 34,933,860 | 273,046 | |||||||||||
Net change in unrealized appreciation (depreciation) | 137,194 | (5,459,374 | ) | 63,644,343 | 213,131,625 | |||||||||||
Increase (Decrease) in Net Assets from Operations | 3,306,603 | (2,728,269 | ) | 96,490,101 | 225,102,911 | |||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Shares | (3,813,300 | ) | (7,650,400 | ) | (11,440,047 | ) | (12,504,477 | ) | ||||||||
Investor Shares | (5,401 | ) | (17,169 | ) | (101,939 | ) | (101,420 | ) | ||||||||
Advisor Shares | — | — | (150,711 | ) | (6,394 | ) | ||||||||||
Net realized gain: | ||||||||||||||||
Institutional Shares | — | (2,569,582 | ) | — | — | |||||||||||
Investor Shares | — | (5,800 | ) | — | — | |||||||||||
Advisor Shares | — | — | — | — | ||||||||||||
Total Distributions to Shareholders | (3,818,701 | ) | (10,242,951 | ) | (11,692,697 | ) | (12,612,291 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 29,956,600 | 88,368,686 | 156,046,493 | 180,461,066 | ||||||||||||
Investor Shares | 142,559 | 921,398 | 5,132,544 | 5,963,037 | ||||||||||||
Advisor Shares | — | — | 12,726,654 | 10,062,207 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 586,583 | 3,217,466 | 7,878,218 | 10,024,075 | ||||||||||||
Investor Shares | 5,377 | 21,133 | 90,587 | 97,787 | ||||||||||||
Advisor Shares | — | — | 144,260 | 6,394 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (21,166,378 | ) | (113,841,299 | ) | (98,807,000 | ) | (284,509,328 | ) | ||||||||
Investor Shares | (492,612 | ) | (1,974,570 | ) | (627,271 | ) | (12,990,457 | ) | ||||||||
Advisor Shares | — | — | (6,388,030 | ) | (654,097 | ) | ||||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | — | 47 | — | 1,001 | ||||||||||||
Investor Shares | — | — | 55 | — | ||||||||||||
Advisor Shares | — | — | — | — | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 9,032,129 | (23,287,139 | ) | 76,196,510 | (91,538,315 | ) | ||||||||||
Increase (Decrease) in Net Assets | 8,520,031 | (36,258,359 | ) | 160,993,914 | 120,952,305 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 343,443,185 | 379,701,544 | 1,194,598,587 | 1,073,646,282 | ||||||||||||
End of period | $ | 351,963,216 | $ | 343,443,185 | $ | 1,355,592,501 | $ | 1,194,598,587 | ||||||||
Undistributed (Accumulated) net investment income (loss) | $ | (971,885 | ) | $ | 18,945 | $ | (2,088,368 | ) | $ | 11,692,431 | ||||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 3,027,663 | 8,791,904 | 12,347,313 | 16,985,955 | ||||||||||||
Investor Shares | 14,376 | 92,228 | 412,269 | 546,811 | ||||||||||||
Advisor Shares | — | — | 1,031,404 | 881,239 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 59,315 | 327,155 | 614,047 | 1,032,346 | ||||||||||||
Investor Shares | 543 | 2,133 | 7,066 | 10,071 | ||||||||||||
Advisor Shares | — | — | 11,332 | 661 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (2,134,091 | ) | (11,431,849 | ) | (7,870,179 | ) | (27,468,737 | ) | ||||||||
Investor Shares | (49,519 | ) | (195,291 | ) | (49,834 | ) | (1,261,668 | ) | ||||||||
Advisor Shares | — | — | (513,408 | ) | (61,070 | ) | ||||||||||
Increase (Decrease) in shares outstanding | 918,287 | (2,413,720 | ) | 5,990,010 | (9,334,392 | ) |
The accompanying notes are an integral part of these financial statements.
106
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 | |||||||||||||
2017 | June 30, | 2017 | June 30, | |||||||||||||
(Unaudited) | 2017 | (Unaudited) | 2017 | |||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | 2,093,547 | $ | 12,204,136 | $ | 1,729,132 | $ | 6,905,565 | ||||||||
Net realized gain (loss) | 81,113,793 | 202,544,697 | 2,351,701 | (22,275,180 | ) | |||||||||||
Net change in unrealized appreciation (depreciation) | 58,173,772 | 118,599,837 | 64,905,335 | 107,847,138 | ||||||||||||
Increase (Decrease) in Net Assets from Operations | 141,381,112 | 333,348,670 | 68,986,168 | 92,477,523 | ||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Shares | — | — | (4,634,486 | ) | (4,318,101 | ) | ||||||||||
Investor Shares | — | — | (1,520,480 | ) | (2,188,677 | ) | ||||||||||
Advisor Shares | — | — | (1,572 | ) | (1,624 | ) | ||||||||||
Net realized gain: | ||||||||||||||||
Institutional Shares | (89,654,329 | ) | — | — | — | |||||||||||
Investor Shares | (275,411 | ) | — | — | — | |||||||||||
Advisor Shares | (29,957 | ) | — | — | — | |||||||||||
Total Distributions to Shareholders | (89,959,697 | ) | — | (6,156,538 | ) | (6,508,402 | ) | |||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 88,634,964 | 1,045,283,865 | 53,874,089 | 95,997,254 | ||||||||||||
Investor Shares | 573,024 | 2,155,914 | 9,027,035 | 20,716,006 | ||||||||||||
Advisor Shares | 7,824 | 56,165 | 11,467 | 16,703 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 24,849,668 | — | 1,577,594 | 1,750,302 | ||||||||||||
Investor Shares | 224,179 | — | 1,425,207 | 2,152,636 | ||||||||||||
Advisor Shares | 29,197 | — | 1,571 | 1,624 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (60,495,917 | ) | (2,221,364,487 | ) | (18,369,872 | ) | (67,106,538 | ) | ||||||||
Investor Shares | (327,866 | ) | (1,290,024 | ) | (22,499,248 | ) | (65,282,879 | ) | ||||||||
Advisor Shares | (68,232 | ) | (467,014 | ) | (19,344 | ) | (83,388 | ) | ||||||||
Redemption fees: | ||||||||||||||||
Institutional Shares | 3 | 10,627 | 6 | 94 | ||||||||||||
Investor Shares | — | — | — | — | ||||||||||||
Advisor Shares | — | — | — | — | ||||||||||||
Increase (Decrease) from Capital Share Transactions | 53,426,844 | (1,175,614,954 | ) | 25,028,505 | (11,838,186 | ) | ||||||||||
Increase (Decrease) in Net Assets | 104,848,259 | (842,266,284 | ) | 87,858,135 | 74,130,935 | |||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 988,855,613 | 1,831,121,897 | 591,246,378 | 517,115,443 | ||||||||||||
End of period | $ | 1,093,703,872 | $ | 988,855,613 | $ | 679,104,513 | $ | 591,246,378 | ||||||||
Undistributed (Accumulated) net investment income (loss) | $ | (13,982,093 | ) | $ | (16,075,640 | ) | $ | (90,704 | ) | $ | 4,336,702 | |||||
SHARE TRANSACTIONS | ||||||||||||||||
Sale of shares: | ||||||||||||||||
Institutional Shares | 7,731,082 | 106,706,685 | 4,936,106 | 10,479,269 | ||||||||||||
Investor Shares | 48,084 | 212,688 | 838,980 | 2,316,631 | ||||||||||||
Advisor Shares | 675 | 6,003 | 1,044 | 1,899 | ||||||||||||
Reinvestment of distributions: | ||||||||||||||||
Institutional Shares | 2,187,471 | — | 142,382 | 207,136 | ||||||||||||
Investor Shares | 19,821 | — | 128,745 | 255,052 | ||||||||||||
Advisor Shares | 2,602 | — | 141 | 191 | ||||||||||||
Redemption of shares: | ||||||||||||||||
Institutional Shares | (5,254,932 | ) | (223,388,247 | ) | (1,678,545 | ) | (7,274,648 | ) | ||||||||
Investor Shares | (28,756 | ) | (134,436 | ) | (2,066,136 | ) | (7,106,002 | ) | ||||||||
Advisor Shares | (5,993 | ) | (48,232 | ) | (1,770 | ) | (9,519 | ) | ||||||||
Increase (Decrease) in shares outstanding | 4,700,054 | (116,645,539 | ) | 2,300,947 | (1,129,991 | ) |
The accompanying notes are an integral part of these financial statements.
107
Statements of Changes in Net Assets
BROWN ADVISORY – | ||||||||
MACQUARIE ASIA | ||||||||
NEW STARS FUND | ||||||||
Six Months Ended | Fiscal | |||||||
December 31, | Year Ended | |||||||
2017 | June 30, | |||||||
(Unaudited) | 2017 | |||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | 612,168 | $ | 527,679 | ||||
Net realized gain (loss) | 10,667,835 | 14,763,577 | ||||||
Net change in unrealized appreciation (depreciation) | 15,690,601 | (720,513 | ) | |||||
Increase (Decrease) in Net Assets from Operations | 26,970,604 | 14,570,743 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||
Net investment income: | ||||||||
Institutional Shares | (885,537 | ) | — | |||||
Investor Shares | (5,842 | ) | — | |||||
Total Distributions to Shareholders | (891,379 | ) | — | |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Sale of shares: | ||||||||
Institutional Shares | 32,792,131 | 94,155,195 | ||||||
Investor Shares | 636,610 | 2,866,009 | ||||||
Reinvestment of distributions: | ||||||||
Institutional Shares | 155,941 | — | ||||||
Investor Shares | 5,768 | — | ||||||
Redemption of shares: | ||||||||
Institutional Shares | (12,762,380 | ) | (80,949,002 | ) | ||||
Investor Shares | (1,941,190 | ) | (4,974,688 | ) | ||||
Redemption fees: | ||||||||
Institutional Shares | — | 1,853 | ||||||
Investor Shares | — | 50 | ||||||
Increase (Decrease) from Capital Share Transactions | 18,886,880 | 11,099,417 | ||||||
Increase (Decrease) in Net Assets | 44,966,105 | 25,670,160 | ||||||
NET ASSETS | ||||||||
Beginning of period | 243,647,085 | 217,976,925 | ||||||
End of period | $ | 288,613,190 | $ | 243,647,085 | ||||
Undistributed (Accumulated) net investment income (loss) | $ | 114,229 | $ | 393,440 | ||||
SHARE TRANSACTIONS | ||||||||
Sale of shares: | ||||||||
Institutional Shares | 3,199,848 | 10,353,255 | ||||||
Investor Shares | 63,427 | 310,586 | ||||||
Reinvestment of distributions: | ||||||||
Institutional Shares | 14,466 | — | ||||||
Investor Shares | 537 | — | ||||||
Redemption of shares: | ||||||||
Institutional Shares | (1,236,446 | ) | (9,199,650 | ) | ||||
Investor Shares | (193,270 | ) | (535,893 | ) | ||||
Increase (Decrease) in shares outstanding | 1,848,562 | 928,298 |
The accompanying notes are an integral part of these financial statements.
108
Financial Highlights (Unaudited for periods beginning after June 30, 2017)
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | $ | 20.03 | (0.03 | ) | 2.66 | 2.63 | — | (1.68 | ) | (1.68 | ) | $ | 20.98 | 13.10 | % | $ | 284,432 | (0.27 | )% | 0.72 | % | 0.72 | % | 10 | % | |||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
10/19/12^ | 06/30/13 | 14.58 | 0.01 | 1.66 | 1.67 | (0.03 | ) | — | (0.03 | ) | 16.22 | 11.49 | 116,575 | 0.30 | 0.78 | 0.78 | 40 | ||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 19.89 | (0.04 | ) | 2.63 | 2.59 | — | (1.68 | ) | (1.68 | ) | 20.80 | 12.99 | 1,589,131 | (0.42 | ) | 0.87 | 0.87 | 10 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 13.80 | 0.03 | 2.41 | 2.44 | (0.03 | ) | — | (0.03 | ) | 16.21 | 17.67 | 1,653,389 | 0.17 | 0.91 | 0.91 | 40 | ||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 19.04 | (0.07 | ) | 2.52 | 2.45 | — | (1.68 | ) | (1.68 | ) | 19.81 | 12.83 | 5,904 | (0.67 | ) | 1.12 | 1.12 | 10 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 13.45 | (0.01 | ) | 2.35 | 2.34 | (0.01 | ) | — | (0.01 | ) | 15.78 | 17.43 | 21,478 | (0.07 | ) | 1.15 | 1.15 | 40 | ||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY FLEXIBLE EQUITY FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 18.53 | 0.06 | 2.29 | 2.35 | (0.12 | ) | — | (0.12 | ) | 20.76 | 12.67 | 113,689 | 0.60 | 0.72 | 0.72 | 7 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
10/19/12^ | 06/30/13 | 10.46 | 0.06 | 1.82 | 1.88 | (0.06 | ) | — | (0.06 | ) | 12.28 | 18.07 | 12 | 0.65 | 1.00 | 0.88 | 12 | ||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 18.50 | 0.04 | 2.29 | 2.33 | (0.09 | ) | — | (0.09 | ) | 20.74 | 12.58 | 335,237 | 0.45 | 0.87 | 0.87 | 7 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 9.68 | 0.05 | 2.60 | 2.65 | (0.05 | ) | — | (0.05 | ) | 12.28 | 27.51 | 82,783 | 0.50 | 1.15 | 1.05 | 12 | ||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 18.50 | 0.02 | 2.28 | 2.30 | (0.03 | ) | — | (0.03 | ) | 20.77 | 12.44 | 6,197 | 0.20 | 1.12 | 1.12 | 7 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 9.68 | 0.02 | 2.61 | 2.63 | (0.03 | ) | — | (0.03 | ) | 12.28 | 27.25 | 6,115 | 0.30 | 1.35 | 1.30 | 12 |
The accompanying notes are an integral part of these financial statements.
109
Financial Highlights (Unaudited for periods beginning after June 30, 2017)
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | $ | 13.80 | 0.13 | 1.28 | 1.41 | (0.14 | ) | (0.45 | ) | (0.59 | ) | $ | 14.62 | 10.23 | % | $ | 30,573 | 1.85 | % | 0.76 | % | 0.76 | % | 8 | % | |||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
10/19/12^ | 06/30/13 | 11.07 | 0.21 | 1.19 | 1.40 | (0.23 | ) | (0.08 | ) | (0.31 | ) | 12.16 | 12.88 | 11 | 2.53 | 0.80 | 0.80 | 21 | |||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 13.80 | 0.12 | 1.27 | 1.39 | (0.13 | ) | (0.45 | ) | (0.58 | ) | 14.61 | 10.07 | 84,159 | 1.70 | 0.91 | 0.91 | 8 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 10.49 | 0.27 | 1.76 | 2.03 | (0.28 | ) | (0.08 | ) | (0.36 | ) | 12.16 | 19.62 | 173,599 | 2.37 | 0.96 | 0.96 | 21 | |||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 13.78 | 0.10 | 1.27 | 1.37 | (0.11 | ) | (0.45 | ) | (0.56 | ) | 14.59 | 9.95 | 2,625 | 1.45 | 1.16 | 1.16 | 8 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 10.48 | 0.25 | 1.75 | 2.00 | (0.26 | ) | (0.08 | ) | (0.34 | ) | 12.14 | 19.33 | 2,346 | 2.13 | 1.20 | 1.20 | 21 | |||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY SUSTAINABLE GROWTH FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 18.94 | — | 2.26 | 2.26 | — | (0.35 | ) | (0.35 | ) | 20.85 | 11.94 | 264,809 | 0.00 | 0.73 | 0.73 | 14 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 10.00 | — | 1.65 | 1.65 | — | (0.01 | ) | (0.01 | ) | 11.64 | 16.47 | 32,045 | 0.03 | 0.86 | 0.86 | 30 | ||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 18.78 | (0.01 | ) | 2.23 | 2.22 | — | (0.35 | ) | (0.35 | ) | 20.65 | 11.83 | 48,952 | (0.15 | ) | 0.88 | 0.88 | 14 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 10.00 | (0.01 | ) | 1.64 | 1.63 | — | (0.01 | ) | (0.01 | ) | 11.62 | 16.27 | 24,028 | (0.12 | ) | 1.01 | 1.01 | 30 | ||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 18.54 | (0.04 | ) | 2.21 | 2.17 | — | (0.35 | ) | (0.35 | ) | 20.36 | 11.71 | 183,956 | (0.40 | ) | 1.13 | 1.13 | 14 | ||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 10.00 | (0.04 | ) | 1.65 | 1.61 | — | (0.01 | ) | (0.01 | ) | 11.60 | 16.07 | 124,256 | (0.37 | ) | 1.26 | 1.26 | 30 |
The accompanying notes are an integral part of these financial statements.
110
Financial Highlights (Unaudited for periods beginning after June 30, 2017)
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: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10/02/17^ | 12/31/17 | $ | 10.00 | (— | ) | 0.28 | 0.28 | — | — | — | $ | 10.28 | 2.80 | % | $ | 9,129 | (0.17 | )% | 0.85 | % | 3.48 | % | 6 | % | |||||||||||||||||||||||||||||||||
BROWN ADVISORY SMALL-CAP GROWTH FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 35.15 | (0.09 | ) | 2.67 | 2.58 | (0.15 | ) | (0.51 | ) | (0.66 | ) | 37.07 | 7.31 | 366,656 | (0.48 | ) | 0.98 | 0.98 | 13 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 28.36 | (0.07 | ) | 6.07 | 6.00 | — | (2.69 | ) | (2.69 | ) | 31.67 | 22.84 | 7,347 | (0.24 | ) | 1.05 | 1.05 | 48 | ||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 17.61 | (0.06 | ) | 1.33 | 1.27 | (0.06 | ) | (0.25 | ) | (0.31 | ) | 18.57 | 7.22 | 380,238 | (0.63 | ) | 1.13 | 1.13 | 13 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 14.31 | (0.05 | ) | 3.06 | 3.01 | — | (1.36 | ) | (1.36 | ) | 15.96 | 22.68 | 281,027 | (0.36 | ) | 1.17 | 1.17 | 48 | ||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 16.85 | (0.08 | ) | 1.27 | 1.19 | (0.02 | ) | (0.24 | ) | (0.26 | ) | 17.78 | 7.09 | 19,072 | (0.88 | ) | 1.38 | 1.38 | 13 | |||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 13.86 | (0.09 | ) | 2.97 | 2.88 | — | (1.31 | ) | (1.31 | ) | 15.43 | 22.45 | 5,493 | (0.60 | ) | 1.41 | 1.41 | 48 |
The accompanying notes are an integral part of these financial statements.
111
Financial Highlights (Unaudited for periods beginning after June 30, 2017)
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 SMALL-CAP FUNDAMENTAL VALUE FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | $ | 27.11 | 0.10 | 2.45 | 2.55 | (0.20 | ) | (1.01 | ) | (1.21 | ) | $ | 28.45 | 9.40 | % | $ | 391,922 | 0.73 | % | 0.97 | % | 0.97 | % | 10 | % | |||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
10/19/12^ | 06/30/13 | 16.77 | 0.06 | 3.30 | 3.36 | (0.07 | ) | — | (0.07 | ) | 20.06 | 20.13 | 1,061 | 1.14 | 1.05 | 1.05 | 34 | ||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 27.08 | 0.08 | 2.44 | 2.52 | (0.15 | ) | (1.01 | ) | (1.16 | ) | 28.44 | 9.34 | 886,375 | 0.58 | 1.12 | 1.12 | 10 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 15.65 | 0.18 | 4.29 | 4.47 | (0.06 | ) | — | (0.06 | ) | 20.06 | 28.64 | 371,018 | 1.01 | 1.18 | 1.18 | 34 | ||||||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 26.95 | 0.05 | 2.42 | 2.47 | (0.07 | ) | (1.01 | ) | (1.08 | ) | 28.34 | 9.18 | 24,805 | 0.33 | 1.37 | 1.37 | 10 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 15.63 | 0.03 | 4.38 | 4.41 | (0.03 | ) | — | (0.03 | ) | 20.01 | 28.28 | 15,764 | 0.75 | 1.44 | 1.44 | 34 | ||||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY GLOBAL LEADERS FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 11.50 | (— | ) | 1.55 | 1.55 | (0.01 | ) | — | (0.01 | ) | 13.04 | 13.49 | 52,105 | (0.04 | ) | 0.85 | 1.11 | 9 | ||||||||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.60 | 0.11 | (0.04 | ) | 0.07 | (0.10 | ) | — | (0.10 | ) | 10.57 | 0.68 | 131,363 | 2.05 | 0.45 | 0.52 | 17 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 11.37 | 0.19 | (0.26 | ) | (0.07 | ) | (0.25 | ) | (0.20 | ) | (0.45 | ) | 10.85 | (0.72 | ) | 241,543 | 1.66 | 0.52 | 0.52 | 111 | ||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.38 | 0.09 | (0.03 | ) | 0.06 | (0.09 | ) | — | (0.09 | ) | 10.35 | 0.57 | 3,931 | 1.80 | 0.70 | 0.77 | 17 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 11.16 | 0.16 | (0.25 | ) | (0.09 | ) | (0.22 | ) | (0.20 | ) | (0.42 | ) | 10.65 | (0.87 | ) | 16,149 | 1.43 | 0.75 | 0.75 | 111 |
The accompanying notes are an integral part of these financial statements.
112
Financial Highlights (Unaudited for periods beginning after June 30, 2017)
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 TOTAL RETURN FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | $ | 10.00 | 0.13 | 0.05 | 0.18 | (0.13 | ) | — | (0.13 | ) | $ | 10.05 | 1.81 | % | $ | 113,269 | 2.54 | % | 0.50 | % | 0.50 | % | 113 | % | ||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.00 | 0.13 | 0.05 | 0.18 | (0.13 | ) | — | (0.13 | ) | 10.05 | 1.79 | 3,209 | 2.49 | 0.55 | 0.55 | 113 | ||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
BROWN ADVISORY STRATEGIC BOND FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 9.61 | 0.13 | 0.02 | 0.15 | (0.14 | ) | — | (0.14 | ) | 9.62 | 1.52 | 126,423 | 2.67 | 0.70 | 0.69 | 94 | ||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 9.61 | 0.12 | 0.01 | 0.13 | (0.12 | ) | — | (0.12 | ) | 9.62 | 1.39 | 211 | 2.42 | 0.95 | 0.94 | 94 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 9.68 | (0.09 | ) | 0.29 | 0.20 | (0.20 | ) | — | (0.20 | ) | 9.68 | 2.09 | 25,570 | (0.87 | ) | 1.40 | 1.40 | 992 | ||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY SUSTAINABLE BOND FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
08/07/17^ | 12/31/17 | 10.00 | 0.08 | (0.06 | ) | 0.02 | (0.06 | ) | — | (0.06 | ) | 9.96 | 0.24 | 22,910 | 1.90 | 0.60 | 1.11 | 47 | |||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY MARYLAND BOND FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.62 | 0.12 | (0.02 | ) | 0.10 | (0.12 | ) | — | (0.12 | ) | 10.60 | 0.99 | 185,830 | 2.32 | 0.48 | 0.48 | 11 | |||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 11.06 | 0.21 | (0.23 | ) | (0.02 | ) | (0.21 | ) | (0.02 | ) | (0.23 | ) | 10.81 | (0.25 | ) | 252,166 | 1.86 | 0.52 | 0.52 | 30 |
The accompanying notes are an integral part of these financial statements.
113
Financial Highlights (Unaudited for periods beginning after June 30, 2017)
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 TAX EXEMPT BOND FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | $ | 9.94 | 0.16 | 0.05 | 0.21 | (0.16 | ) | — | (0.16 | ) | $ | 9.99 | 2.09 | % | $ | 311,799 | 3.10 | % | 0.48 | % | 0.48 | % | 22 | % | ||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||
07/01/12 | 06/30/13 | 10.00 | 0.13 | (0.12 | ) | 0.01 | (0.13 | ) | (0.04 | ) | (0.17 | ) | 9.84 | 0.03 | 161,891 | 1.35 | 0.55 | 0.55 | 87 | ||||||||||||||||||||||||||||||||||||||
BROWN ADVISORY MORTGAGE SECURITIES FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 9.87 | 0.08 | 0.01 | 0.09 | (0.11 | ) | — | (0.11 | ) | 9.85 | 0.91 | 351,567 | 1.63 | 0.48 | 0.48 | 177 | ||||||||||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 9.87 | 0.08 | 0.02 | 0.10 | (0.11 | ) | — | (0.11 | ) | 9.86 | 0.98 | 396 | 1.58 | 0.53 | 0.53 | 177 | ||||||||||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 12.05 | (0.02 | ) | 0.98 | 0.96 | (0.11 | ) | — | (0.11 | ) | 12.90 | 7.99 | 1,324,700 | (0.32 | ) | 1.07 | 1.07 | 12 | ||||||||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 12.05 | (0.03 | ) | 0.98 | 0.95 | (0.11 | ) | — | (0.11 | ) | 12.89 | 7.87 | 12,644 | (0.47 | ) | 1.22 | 1.22 | 12 | ||||||||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 11.98 | (0.05 | ) | 0.98 | 0.93 | (0.11 | ) | — | (0.11 | ) | 12.80 | 7.74 | 18,249 | (0.72 | ) | 1.47 | 1.47 | 12 | ||||||||||||||||||||||||||||||||||||||
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.
114
Financial Highlights (Unaudited for periods beginning after June 30, 2017)
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | $ | 10.89 | 0.02 | 1.51 | 1.53 | — | (0.97 | ) | (0.97 | ) | $ | 11.45 | 14.12 | % | $ | 1,089,926 | 0.39 | % | 1.17 | % | 1.17 | % | 38 | % | ||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.85 | 0.01 | 1.51 | 1.52 | — | (0.97 | ) | (0.97 | ) | 11.40 | 14.08 | 3,402 | 0.24 | 1.32 | 1.32 | 38 | ||||||||||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.79 | (— | ) | 1.50 | 1.50 | — | (0.97 | ) | (0.97 | ) | 11.32 | 13.99 | 376 | (0.01 | ) | 1.57 | 1.57 | 38 | ||||||||||||||||||||||||||||||||||||||
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* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.17 | 0.03 | 1.15 | 1.18 | (0.11 | ) | — | (0.11 | ) | 11.24 | 11.59 | 488,449 | 0.58 | 1.15 | 1.15 | 4 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
12/12/12^ | 06/30/13 | 10.00 | 0.12 | (0.60 | ) | (0.48 | ) | (— | )(e) | — | (— | )(e) | 9.52 | (4.77 | ) | 122,515 | 2.17 | 1.41 | 1.41 | 19 | |||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.15 | 0.02 | 1.14 | 1.16 | (0.09 | ) | — | (0.09 | ) | 11.22 | 11.45 | 190,383 | 0.43 | 1.30 | 1.30 | 4 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
12/12/12^ | 06/30/13 | 10.00 | 0.11 | (0.60 | ) | (0.49 | ) | (— | )(e) | — | (— | )(e) | 9.51 | (4.87 | ) | 11,695 | 2.02 | 1.56 | 1.56 | 19 | |||||||||||||||||||||||||||||||||||||
Advisor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 10.19 | 0.01 | 1.14 | 1.15 | (0.07 | ) | — | (0.07 | ) | 11.27 | 11.25 | 273 | 0.18 | 1.55 | 1.55 | 4 | ||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||
12/12/12^ | 06/30/13 | 10.00 | 0.10 | (0.61 | ) | (0.51 | ) | (— | )(e) | — | (— | )(e) | 9.49 | (5.07 | ) | 990 | 1.77 | 1.81 | 1.81 | 19 |
The accompanying notes are an integral part of these financial statements.
115
Financial Highlights (Unaudited for periods beginning after June 30, 2017)
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 – MACQUARIE ASIA NEW STARS FUND: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Institutional Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | $ | 9.87 | 0.02 | 1.02 | 1.04 | (0.03 | ) | — | (0.03 | ) | $ | 10.88 | 10.58 | % | $ | 285,787 | 0.46 | % | 1.50 | % | 1.50 | % | 50 | % | ||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 9.18 | 0.02 | 0.67 | 0.69 | — | — | — | 9.87 | 7.52 | 239,812 | 0.25 | 1.55 | 1.55 | 169 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 11.70 | (— | ) | (2.10 | ) | (2.10 | ) | — | (0.42 | ) | (0.42 | ) | 9.18 | (18.16 | ) | 212,344 | (0.03 | ) | 1.51 | 1.51 | 126 | |||||||||||||||||||||||||||||||||||
11/21/14^ | 06/30/15 | 10.00 | 0.02 | 1.68 | 1.70 | — | — | — | 11.70 | 17.00 | 187,901 | 0.27 | 1.83 | 1.83 | 89 | ||||||||||||||||||||||||||||||||||||||||||
Investor Shares* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
07/01/17 | 12/31/17 | 9.83 | 0.02 | 1.01 | 1.03 | (0.02 | ) | — | (0.02 | ) | 10.84 | 10.51 | 2,826 | 0.31 | 1.65 | 1.65 | 50 | ||||||||||||||||||||||||||||||||||||||||
07/01/16 | 06/30/17 | 9.15 | 0.01 | 0.67 | 0.68 | — | — | — | 9.83 | 7.43 | 3,835 | 0.10 | 1.70 | 1.70 | 169 | ||||||||||||||||||||||||||||||||||||||||||
07/01/15 | 06/30/16 | 11.69 | (0.02 | ) | (2.10 | ) | (2.12 | ) | — | (0.42 | ) | (0.42 | ) | 9.15 | (18.35 | ) | 5,633 | (0.18 | ) | 1.66 | 1.66 | 126 | |||||||||||||||||||||||||||||||||||
11/21/14^ | 06/30/15 | 10.00 | 0.01 | 1.68 | 1.69 | — | — | — | 11.69 | 16.90 | 18,992 | 0.12 | 1.98 | 1.98 | 89 |
* | Redemption fees of less than $0.005/share are not presented and are included in net realized & unrealized gains (losses) from investment operations. Prior to October 19, 2012, Investor Shares of the Brown Advisory Growth Equity Fund, Flexible Equity Fund, Equity Income Fund, Small-Cap Growth Fund, Small-Cap Fundamental Value Fund, Intermediate Income Fund and Maryland Bond Fund were known as Institutional Shares. Prior to October 19, 2012, Institutional Shares of the Brown Advisory Small-Cap Growth Fund were known as D Shares. |
^ | 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.
www.brownadvisoryfunds.com
116
Notes to Financial Statements
December 31, 2017 (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 – Macquarie Asia New Stars Fund (“Macquarie Asia New Stars Fund”) (individually a “Fund,” and collectively, the “Funds”) are each a series of shares of beneficial interest of Brown Advisory Funds (the “Trust”), which is registered under the Investment Company Act of 1940 as an open-ended management investment company. Prior to October 19, 2012, the Funds, except for the Sustainable Growth Fund, Mid-Cap Growth Fund, Global Leaders Fund, Total Return Fund, Sustainable Bond Fund, Tax Exempt Bond Fund, Mortgage Securities Fund, WMC Strategic European Equity Fund, WMC Japan Alpha Opportunities Fund, Somerset Emerging Markets Fund, and Macquarie Asia New Stars Fund, were series of Professionally Managed Portfolios Trust.
The Funds commenced operations as follows:
Institutional | Investor | Advisor | ||||||||
Shares | Shares | Shares | ||||||||
Growth Equity Fund | 10/19/2012 | 6/28/1999 | * | 5/18/2006 | ||||||
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 | — | 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 | — | 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 | — | 8/7/2017 | — | |||||||
Maryland Bond Fund | — | 12/21/2000 | * | — | ||||||
Tax Exempt Bond Fund | — | 6/29/2012 | — | |||||||
Mortgage Securities Fund | — | 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 | |||||||
Macquarie Asia New Stars Fund | 11/21/2014 | 11/21/2014 | — |
_________________________
* | Prior to October 19, 2012, Investor Shares were known as Institutional Shares. | |
** | Prior to October 19, 2012, Small-Cap Growth Fund Institutional Shares were known as D Shares. |
Each share class has equal rights as to earnings and assets except that each class bears different shareholder servicing and distribution expenses. Each share class has exclusive voting rights with respect to matters that affect just that class. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each share class on its relative net assets.
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
117
Notes to Financial Statements
December 31, 2017 (Unaudited)
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 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 Macquarie Asia New Stars Fund’s investment objective is to achieve total return by investing principally in equity securities issued by small and medium capitalization companies which are domiciled in or exercise the predominant part of their economic activity in Asia (excluding Japan).
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
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Notes to Financial Statements
December 31, 2017 (Unaudited)
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 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, 2017, the Small-Cap Growth Fund was the only fund that held any fair valued securities. As of December 31, 2017, the Small-Cap Growth Fund held fair valued securities with a total market value of $2,580,022 or 0.3% of net assets.
The following is a summary of inputs used to value the Funds’ investments as of December 31, 2017:
Level 1 | Level 2 | Level 3 | ||||||||||
Growth Equity Fund | ||||||||||||
Common Stocks | $ | 1,773,122,065 | $ | — | $ | — | ||||||
REIT^ | 64,789,719 | — | — | |||||||||
Short-Term Investments | 41,317,180 | — | — | |||||||||
Total Investments | $ | 1,879,228,964 | $ | — | $ | — | ||||||
Flexible Equity Fund | ||||||||||||
Common Stocks | $ | 423,005,438 | $ | — | $ | — | ||||||
REIT^ | 7,891,701 | — | — | |||||||||
Closed-End Funds | 12,237,161 | — | — | |||||||||
Warrants | 552,000 | — | — | |||||||||
Short-Term Investments | 7,995,064 | — | — | |||||||||
Total Investments | $ | 451,681,364 | $ | — | $ | — | ||||||
Equity Income Fund | ||||||||||||
Common Stocks | $ | 107,678,551 | $ | — | $ | — | ||||||
REIT^ | 7,916,045 | — | — | |||||||||
Short-Term Investments | 1,505,250 | — | — | |||||||||
Total Investments | $ | 117,099,846 | $ | — | $ | — | ||||||
Sustainable Growth Fund | ||||||||||||
Common Stocks | $ | 449,351,564 | $ | — | $ | — | ||||||
REIT^ | 21,910,973 | — | — | |||||||||
Short-Term Investments | 28,558,933 | — | — | |||||||||
Total Investments | $ | 499,821,470 | $ | — | $ | — |
119
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Level 1 | Level 2 | Level 3 | ||||||||||
Mid-Cap Growth Fund | ||||||||||||
Common Stocks | $ | 7,052,296 | $ | — | $ | — | ||||||
REIT^ | 205,688 | — | — | |||||||||
Short-Term Investments | 1,406,639 | — | — | |||||||||
Total Investments | $ | 8,664,623 | $ | — | $ | — | ||||||
Small-Cap Growth Fund | ||||||||||||
Common Stocks | $ | 718,813,457 | $ | — | $ | — | ||||||
Private Placements | — | — | 2,448,830 | |||||||||
Contingent Value Rights | — | — | 131,192 | |||||||||
Short-Term Investments | 49,685,917 | — | — | |||||||||
Total Investments | $ | 768,499,374 | $ | — | $ | 2,580,022 | ||||||
Small-Cap Fundamental Value Fund | ||||||||||||
Common Stocks | $ | 1,132,329,298 | $ | — | $ | — | ||||||
REIT^ | 132,502,330 | — | — | |||||||||
Short-Term Investments | 34,779,281 | — | — | |||||||||
Total Investments | $ | 1,299,610,909 | $ | — | $ | — | ||||||
Global Leaders Fund | ||||||||||||
Common Stocks: | ||||||||||||
China | $ | — | $ | 1,635,492 | $ | — | ||||||
France | — | 1,711,593 | — | |||||||||
Germany | — | 3,773,429 | — | |||||||||
India | 1,307,570 | — | — | |||||||||
Indonesia | 1,124,745 | — | — | |||||||||
Japan | — | 944,246 | — | |||||||||
Sweden | — | 1,780,868 | — | |||||||||
Switzerland | — | 1,641,474 | — | |||||||||
Taiwan | 1,705,902 | — | — | |||||||||
United Kingdom | 1,275,391 | 1,687,886 | — | |||||||||
United States | 30,676,822 | — | — | |||||||||
Short-Term Investments | 1,908,681 | — | — | |||||||||
Total Investments | $ | 37,999,111 | $ | 13,174,988 | $ | — | ||||||
Intermediate Income Fund | ||||||||||||
Corporate Bonds & Notes | $ | — | $ | 35,988,424 | $ | — | ||||||
Mortgage Backed Securities | — | 20,488,203 | — | |||||||||
Municipal Bonds | — | 13,817,833 | — | |||||||||
Asset Backed Securities | — | 11,607,346 | — | |||||||||
U.S. Treasury Notes | — | 20,724,260 | — | |||||||||
Affiliated Mutual Funds | 29,502,612 | — | — | |||||||||
Short-Term Investments | 3,559,800 | — | — | |||||||||
Total Investments | $ | 33,062,412 | $ | 102,626,066 | $ | — | ||||||
Total Return Fund | ||||||||||||
Corporate Bonds & Notes | $ | — | $ | 39,663,409 | $ | — | ||||||
Mortgage Backed Securities | — | 35,113,979 | — | |||||||||
Asset Backed Securities | — | 29,257,387 | — | |||||||||
U.S. Treasury Notes | — | 7,711,897 | — | |||||||||
Municipal Bonds | — | 6,590,976 | — | |||||||||
Short-Term Investments | 5,660,047 | 547,627 | — | |||||||||
Total Investments | $ | 5,660,047 | $ | 118,885,275 | $ | — | ||||||
Futures Contracts – Long* | $ | 63,696 | $ | — | $ | — | ||||||
Futures Contracts – Short* | $ | 18,903 | $ | — | $ | — | ||||||
Strategic Bond Fund | ||||||||||||
Asset Backed Securities | $ | — | $ | 57,590,017 | $ | — | ||||||
Mortgage Backed Securities | — | 32,688,218 | — | |||||||||
Corporate Bonds & Notes | — | 31,289,945 | — | |||||||||
Municipal Bonds | — | 9,814,984 | — | |||||||||
Preferred Stocks | 363,216 | — | — | |||||||||
Closed-End Funds | 641,372 | — | — | |||||||||
Exchange Traded Funds | 4,473,645 | — | — | |||||||||
Short-Term Investments | 2,774,761 | 99,796 | — | |||||||||
Total Investments | $ | 8,252,994 | $ | 131,482,960 | $ | — | ||||||
Futures Contracts – Short* | $ | 46,402 | $ | — | $ | — | ||||||
Sustainable Bond Fund | ||||||||||||
Corporate Bonds & Notes | $ | — | $ | 8,741,140 | $ | — | ||||||
Municipal Bonds | — | 3,730,101 | — | |||||||||
Mortgage Backed Securities | — | 3,254,899 | — | |||||||||
U.S. Treasury Notes | — | 599,263 | — | |||||||||
Foreign Government Bonds | — | 3,407,150 | — | |||||||||
Short-Term Investments | 5,120,581 | — | — | |||||||||
Total Investments | $ | 5,120,581 | $ | 19,732,553 | $ | — | ||||||
Futures Contracts – Long* | $ | 3,996 | $ | — | $ | — | ||||||
Futures Contracts – Short* | $ | 5,609 | $ | — | $ | — | ||||||
Maryland Bond Fund | ||||||||||||
Municipal Bonds | $ | — | $ | 182,612,615 | $ | — | ||||||
Short-Term Investments | 850,043 | — | — | |||||||||
Total Investments | $ | 850,043 | $ | 182,612,615 | $ | — | ||||||
Tax Exempt Bond Fund | ||||||||||||
Municipal Bonds | $ | — | $ | 300,534,934 | $ | — | ||||||
Short-Term Investments | 6,271,314 | — | — | |||||||||
Total Investments | $ | 6,271,314 | $ | 300,534,934 | $ | — | ||||||
Mortgage Securities Fund | ||||||||||||
Mortgage Backed Securities | $ | — | $ | 333,531,667 | $ | — | ||||||
Asset Backed Securities | — | 61,286,247 | — | |||||||||
Municipal Bonds | — | 8,783,532 | — | |||||||||
Preferred Stocks | 387,600 | — | — | |||||||||
Short-Term Investments | 22,210,252 | 298,705 | — | |||||||||
Total Investments | $ | 22,597,852 | $ | 403,900,151 | $ | — | ||||||
Futures Contracts – Long* | $ | 20,314 | $ | — | $ | — | ||||||
Futures Contracts – Short* | $ | (7,723 | ) | $ | — | $ | — |
120
Notes to Financial Statements
December 31, 2017 (Unaudited)
Level 1 | Level 2 | Level 3 | ||||||||||
WMC Strategic European Equity Fund | ||||||||||||
Common Stocks: | ||||||||||||
Austria | $ | — | $ | 7,548,447 | $ | — | ||||||
Belgium | — | 39,432,271 | — | |||||||||
Denmark | 6,816,916 | 39,238,342 | — | |||||||||
Finland | 13,488,927 | 55,344,986 | — | |||||||||
France | 15,719,862 | 172,219,484 | — | |||||||||
Germany | — | 154,424,554 | — | |||||||||
Italy | — | 13,449,766 | — | |||||||||
Netherlands | — | 108,383,079 | — | |||||||||
Spain | — | 13,831,095 | — | |||||||||
Sweden | — | 131,026,424 | — | |||||||||
Switzerland | 6,181,120 | 193,540,617 | — | |||||||||
United Kingdom | 42,076,529 | 305,287,931 | — | |||||||||
Preferred Stocks | — | 9,059,434 | — | |||||||||
Short-Term Investments | 25,376,570 | — | — | |||||||||
Total Investments | $ | 109,659,924 | $ | 1,242,786,430 | $ | — | ||||||
WMC Japan Alpha Opportunities Fund | ||||||||||||
Common Stocks | $ | 7,357,762 | $ | 1,034,711,766 | $ | — | ||||||
REIT^ | 1,072,881 | — | — | |||||||||
Short-Term Investments | 49,598,493 | — | — | |||||||||
Total Investments | $ | 58,029,136 | $ | 1,034,711,766 | $ | — | ||||||
Futures Contracts – Long* | $ | 746,988 | $ | — | $ | — | ||||||
Somerset Emerging Markets Fund | ||||||||||||
Common Stocks: | ||||||||||||
Brazil | $ | — | $ | 34,705,244 | $ | — | ||||||
Chile | 31,964,777 | — | — | |||||||||
China | — | 25,311,339 | — | |||||||||
Greece | — | 3,315,523 | — | |||||||||
Hungary | — | 58,275,653 | — | |||||||||
India | 21,934,364 | 42,172,898 | — | |||||||||
Indonesia | 3,058,156 | 16,283,501 | — | |||||||||
Nigeria | 4,649,992 | — | — | |||||||||
Philippines | — | 12,444,342 | — | |||||||||
Poland | 5,933,304 | 18,128,570 | — | |||||||||
Portugal | — | 7,837,999 | — | |||||||||
Russia | 2,808,826 | 7,197,316 | — | |||||||||
South Africa | — | 36,256,700 | — | |||||||||
South Korea | — | 136,032,764 | — | |||||||||
Taiwan | 14,673,643 | 54,253,393 | — | |||||||||
Turkey | 6,660,285 | 25,201,458 | — | |||||||||
United Arab Emirates | 4,126,897 | 12,225,340 | — | |||||||||
United Kingdom | 23,185,568 | 42,348,736 | — | |||||||||
Short-Term Investments | 24,045,104 | — | — | |||||||||
Total Investments | $ | 143,040,916 | $ | 531,990,776 | $ | — | ||||||
Macquarie Asia New Stars Fund | ||||||||||||
Common Stocks: | ||||||||||||
China | $ | 44,313,650 | $ | 70,928,038 | $ | — | ||||||
India | 3,286,717 | 41,013,409 | — | |||||||||
Indonesia | 3,594,141 | 6,678,850 | — | |||||||||
Philippines | — | 7,297,090 | — | |||||||||
Singapore | — | 2,727,022 | — | |||||||||
South Korea | — | 55,352,185 | — | |||||||||
Taiwan | 5,246,501 | 26,853,759 | — | |||||||||
Thailand | 4,587,596 | — | — | |||||||||
REIT^ | 2,895,919 | — | — | |||||||||
Short-Term Investments | 12,342,846 | — | — | |||||||||
Total Investments | $ | 76,267,370 | $ | 210,850,353 | $ | — |
^ | Real Estate Investment Trusts |
* | Amounts presented for Futures Contracts represent net unrealized appreciation (depreciation) as of December 31, 2017. |
The Funds recognize transfers between levels as of the end of the fiscal year. There were no transfers into or out of Level 1 or Level 2 securities as of December 31, 2017.
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, 2017 | $ | 131,192 | $ | 2,415,460 | ||||
Acquisitions/Purchases | — | 3,000 | ||||||
Returns of Capital | — | (97,000 | ) | |||||
Realized Gains | — | 80,000 | ||||||
Change in Unrealized Appreciation | — | 47,370 | ||||||
Balance as of December 31, 2017 | $ | 131,192 | $ | 2,448,830 |
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. The CVR are valued at the difference between the cash price at which Dyax Corp. was acquired by Shire PLC and the closing price of Dyax Corp. on its last day of trading prior to the acquisition.
121
Notes to Financial Statements
December 31, 2017 (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.
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.
The Funds report net realized foreign exchange gains and losses that arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. Dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of the assets and liabilities, other than investments in securities at fiscal year end, resulting from changes in exchange rates.
Some of the Funds may invest in forward foreign currency contracts. These amounts are presented separately from realized and unrealized gains and losses from investments in the financial statements. None of the Funds purchased or sold forward foreign currency contracts during the six months ended December 31, 2017.
D. Options – The Funds may invest in options. When a Fund writes an option, an amount equal to the premium received by a Fund is recorded as a liability and is subsequently adjusted to the current value of the option written. Premiums received from writing options that expire unexercised are treated by a Fund on the expiration date as realized gain from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency determining whether a Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchase by a Fund. A Fund, as a writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option.
When a Fund purchases an option, an amount equal to the premium paid by a Fund is recorded as an investment and is subsequently adjusted to the current value of the option purchased. If an option expires on the stipulated expiration date or if a Fund enters into a closing sale transaction, a gain or loss is realized. If a call option is exercised, the cost of the security acquired is increased by the premium paid for the call. If a put option is exercised, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are decreased by the premium originally paid. Written and purchased options are non- income producing securities.
None of the Funds purchased, sold or wrote any options during the six months ended December 31, 2017.
E. Distributions to Shareholders – For the Maryland Bond Fund and Tax Exempt Bond Fund distributions of net investment income, if any, are declared daily and paid monthly. Distributions to shareholders of net investment income, if any, are declared and paid monthly for the Intermediate Income Fund, Total Return Fund, Strategic Bond Fund, Sustainable Bond 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.
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Notes to Financial Statements
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F. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates.
G. Federal Taxes – Each Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provision for federal income taxes or excise taxes has been made.
The Funds recognize tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities.
The Funds have analyzed their tax positions and have concluded that no liability for unrecognized tax benefits should be recorded related to uncertain income tax positions taken on returns filed for open tax years (2014-2016) as of June 30, 2017 or are expected to be taken in the Funds’ 2017 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.
H. Redemption Fees – A shareholder who redeems or exchanges shares of the Funds within fourteen days of purchase will incur a redemption fee of 1.00% of the current net asset value of shares redeemed or exchanged, subject to certain exceptions. The fee is charged for the benefit of the remaining shareholders and will be paid to the Fund to help offset transaction costs. The fee is accounted for as an addition to paid-in capital. Each Fund reserves the right to modify the terms of or terminate the fee at any time. There are limited exceptions to the imposition of the redemption fee.
I. Guarantees and Indemnifications – In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote.
J. 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.
K. Subsequent Events – In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition through the date the financial statements were issued.
123
Notes to Financial Statements
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Note 3. Commitments and Other Affiliated Party Transactions
Investment Adviser – Brown Advisory LLC serves as Investment Adviser (“the Adviser”) to the Funds. Pursuant to investment advisory agreements, the Adviser receives an advisory fee, accrued daily and payable monthly, from each Fund at an annual rate of the Fund’s average daily net assets as follows:
Annual Advisory Fee | Annual Advisory Fee | ||
Growth Equity Fund | 0.60% | Strategic Bond Fund | 0.40% |
Flexible Equity Fund | 0.60% | Sustainable Bond Fund | 0.30% |
Equity Income Fund | 0.60% | Maryland Bond Fund | 0.30% |
Sustainable Growth Fund | 0.60% | Tax Exempt Bond Fund | 0.30% |
Mid-Cap Growth Fund | 0.65% | Mortgage Securities Fund | 0.30% |
Small-Cap Growth Fund | 0.85% | WMC Strategic European Equity Fund** | 0.90% |
Small-Cap Fundamental Value Fund | 0.85% | WMC Japan Alpha Opportunities Fund** | 1.00% |
Global Leaders Fund* | 0.65% | Somerset Emerging Markets Fund*** | 0.90% |
Intermediate Income Fund | 0.30% | Macquarie Asia New Stars Fund**** | 1.25% |
Total Return Fund | 0.30% |
* | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2017, Brown Advisory Limited (“BAL”) served as sub- adviser to the Global Leaders Fund and made investment decisions on its behalf. BAL is compensated for its services by the Adviser. | ||
** | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2017, 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. | ||
*** | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2017, 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. | ||
**** | Subject to the general oversight of the Adviser and Board of Trustees during the six months ended December 31, 2017, Macquarie Funds Management Hong Kong Limited (“MFMHKL”) served as sub-adviser to the Macquarie Asia New Stars Fund and made investment decisions on its behalf. MFMHKL is compensated for its services by the Adviser. |
The Adviser is also entitled to receive an annual business management fee of 0.05%, accrued daily and payable monthly, of the Funds’ average daily net assets in exchange for its management and oversight of the non-investment advisory services provided to the Funds and the Trust. The Funds’ advisory fees and business management fees are reported in the Statements of Operations.
Fee Waivers and Expense Reimbursements (Operating Expense Caps) – The Adviser has contractually agreed to waive a portion of its fees and reimburse certain expenses to limit total annual operating expenses for each or the class’ average daily net assets for the Funds noted below:
Institutional Shares | Investor Shares | Advisor Shares | |
Growth Equity Fund | 1.00% | 1.15% | 1.35% |
Flexible Equity Fund | 1.00% | 1.15% | 1.35% |
Equity Income Fund | 1.00% | 1.15% | 1.35% |
Sustainable Growth Fund | 1.00% | 1.15% | 1.35% |
Mid-Cap Growth Fund | 0.70% | 0.85% | 1.10% |
Small-Cap Growth Fund | 1.25% | 1.40% | 1.60% |
Small-Cap Fundamental Value Fund | 1.25% | 1.40% | 1.60% |
Global Leaders Fund | 0.70% | 0.85% | 1.10% |
Intermediate Income Fund | 0.55% | 0.60% | 0.80% |
Total Return Fund | 0.55% | 0.60% | 0.80% |
Strategic Bond Fund | 0.65% | 0.70% | 0.95% |
Sustainable Bond Fund | 0.55% | 0.60% | 0.80% |
Maryland Bond Fund | 0.55% | 0.60% | 0.80% |
Tax Exempt Bond Fund | 0.55% | 0.60% | 0.80% |
Mortgage Securities Fund | 0.55% | 0.60% | 0.80% |
WMC Strategic European Equity Fund | 1.60% | 1.75% | 2.00% |
WMC Japan Alpha Opportunities Fund | 1.70% | 1.85% | 2.10% |
Somerset Emerging Markets Fund | 1.60% | 1.75% | 2.00% |
Macquarie Asia New Stars Fund | 1.95% | 2.10% | 2.35% |
124
Notes to Financial Statements
December 31, 2017 (Unaudited)
During the six months ended December 31, 2017, the Adviser waived $17,899 in expenses for the Mid-Cap Growth Fund, $58,314 in expenses for Global Leaders Fund, and $27,208 in expenses for Sustainable Bond. The Adviser is permitted to seek reimbursement from the Funds for fees waived and/or Fund expenses it pays over the following three years after such payment. The Funds must pay their current ordinary operating expenses before the Adviser is entitled to any reimbursement of fees and/or expenses. At December 31, 2017, the cumulative amounts of previously waived fees that the Adviser may recoup from the Funds are shown below:
June 30, | ||||||||||||||||
2018 | 2019 | 2020 | Total | |||||||||||||
Global Leaders Fund | $ | — | $ | 84,282 | $ | 99,017 | $ | 183,299 | ||||||||
Strategic Bond Fund | 7,500 | 14,033 | 15,150 | 36,683 |
During the six months ended December 31, 2017, the Adviser has recouped $7,195 of the $36,683 of previously waived fees in the Strategic 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 distribution fees are reported in the Funds’ Statements of Operations.
The Trust has also adopted a Shareholder Service Plan under which each Fund may pay a fee of up to 0.15% of the average daily net assets of each Fund’s Investor and Advisor Shares (except for the Maryland Bond Fund, Intermediate Income Fund, Tax Exempt Bond Fund, Mortgage Securities Fund, Total Return Fund, Strategic Bond Fund and Sustainable Bond Fund, which may pay a fee of up to 0.05%) for shareholder services provided to the Funds by financial institutions, including the Adviser. These service fees are reported in the Funds’ Statements of Operations.
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, 2017, the Intermediate Income Fund owned shares of the Mortgage Securities Fund with a total market value of $29,502,612, or 21.8% 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, 2017, the Intermediate Income Fund waived $44,870 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, 2017:
Beginning | Unrealized | Net | Change In | Ending Market | ||||||||||||||||||||||||||||||
Market Value | Proceeds | Appreciation | Realized | Unrealized | Value | Capital | ||||||||||||||||||||||||||||
[# of shares held] | Purchases at Cost | from Sales | (Depreciation) | Gains | Appreciation | [# of shares held] | Dividend | Gain | ||||||||||||||||||||||||||
7/01/2017 | [# of shares purchased] | [# of shares sold] | 12/31/2017 | (Losses) | (Depreciation) | 12/31/2017 | Income | Distributions | ||||||||||||||||||||||||||
$ | 29,562,515 | $ | — | $ | — | $ | (735,829 | ) | $ | — | $ | (59,903 | ) | $ | 29,502,612 | $ | 328,722 | $ | — | |||||||||||||||
[2,995,189 | ] | [— | ] | [— | ] | [2,995,189 | ] |
Other Service Providers – U.S. Bancorp Fund Services, LLC (“USBFS”), an indirect wholly-owned subsidiary of U.S. Bancorp, serves as the Funds’ Administrator (“Administrator”), and in that capacity, performs various administrative and accounting services for the Funds. USBFS also serves as the Funds’ fund accountant and transfer agent. Certain officers of the Trust are employees of
125
Notes to Financial Statements
December 31, 2017 (Unaudited)
USBFS and the Funds’ custodian, U.S. Bank, N.A., is an affiliate of the Administrator. Fees paid to USBFS and U.S. Bank, N.A. for its services can be found in the Statements of Operations as “Administration, accounting and transfer agent fees” and “Custodian fees”, respectively. Additional amounts for miscellaneous expenses may be paid by the Funds to USBFS and included in “Miscellaneous expenses” in the Statements of Operations.
Rule 17a-7 Transactions – Each Fund is permitted to engage in the purchase and sale of portfolio securities with 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, 2017, the Sustainable Bond Fund and WMC Strategic European Equity Fund engaged in securities purchases of $1,260,253 and $312,245, 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, 2017 were as follows:
Fund | Purchases | Sales | Fund | Purchases | Sales | |||
Growth Equity | $185,365,247 | $277,207,112 | Strategic Bond | $133,646,042 | $122,039,033 | |||
Flexible Equity | 31,096,713 | 41,031,726 | Sustainable Bond | 24,274,770 | 5,637,114 | |||
Equity Income | 8,402,349 | 13,161,122 | Maryland Bond | 26,372,551 | 20,179,087 | |||
Sustainable Growth | 69,084,907 | 61,011,528 | Tax Exempt Bond | 111,168,771 | 59,978,694 | |||
Mid-Cap Growth | 7,336,500 | 162,042 | Mortgage Securities | 744,489,343 | 782,757,616 | |||
Small-Cap Growth | 262,470,792 | 81,798,507 | WMC Strategic European Equity | 194,883,347 | 145,217,010 | |||
Small-Cap Fundamental Value | 134,262,393 | 125,896,368 | WMC Japan Alpha Opportunities | 380,541,215 | 389,803,386 | |||
Global Leaders | 8,981,917 | 3,806,644 | Somerset Emerging Markets | 33,621,383 | 23,399,909 | |||
Intermediate Income | 21,793,359 | 22,605,009 | Macquarie Asia New Stars | 143,356,487 | 127,308,916 | |||
Total Return | 136,381,285 | 132,773,236 |
The Intermediate Income Fund purchased $3,733,455 and sold $2,413,629 in U.S. Government securities during the six months ended December 31, 2017. The Sustainable Bond Fund purchased $3,617,817 and sold $3,593,670 in U.S. Government Securities during the six months ended December 31, 2017. Purchases and sales of U.S. Government securities are included in the totals above and include U.S. Treasury Bonds and Notes.
The cost basis of investments for federal income tax purposes at December 31, 2017 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 | $ | 1,098,998,920 | $ | 275,061,324 | $ | 70,942,736 | $ | 331,289,546 | $ | 8,577,786 | $ | 599,205,567 | ||||||||||||
Gross unrealized appreciation | 789,825,429 | 182,517,714 | 46,617,739 | 169,001,903 | 144,838 | 198,564,197 | ||||||||||||||||||
Gross unrealized depreciation | (9,595,385 | ) | (5,897,674 | ) | (460,629 | ) | (469,979 | ) | (58,001 | ) | (26,690,368 | ) | ||||||||||||
Net unrealized app (dep) | $ | 780,230,044 | $ | 176,620,040 | $ | 46,157,110 | $ | 168,531,924 | $ | 86,837 | $ | 171,873,829 | ||||||||||||
Small-Cap | Global | Intermediate | Total | Strategic | Sustainable | |||||||||||||||||||
Fundamental | Leaders | Income | Return | Bond | Bond | |||||||||||||||||||
Value Fund | Fund | Fund | Fund | Fund | Fund | |||||||||||||||||||
Cost of investments | $ | 940,992,698 | $ | 38,629,711 | $ | 136,489,349 | $ | 124,238,243 | $ | 139,084,600 | $ | 24,912,092 | ||||||||||||
Gross unrealized appreciation | 371,567,901 | 12,602,493 | 678,664 | 1,013,696 | 1,176,270 | 31,490 | ||||||||||||||||||
Gross unrealized depreciation | (12,949,690 | ) | (58,105 | ) | (1,479,535 | ) | (706,617 | ) | (524,916 | ) | (90,448 | ) | ||||||||||||
Net unrealized app (dep) | $ | 358,618,211 | $ | 12,544,388 | $ | (800,871 | ) | $ | 307,079 | $ | 651,354 | $ | (58,958 | ) |
126
Notes to Financial Statements
December 31, 2017 (Unaudited)
WMC Japan | ||||||||||||||||||||||||
Maryland | Tax Exempt | Mortgage | WMC Strategic | Alpha | Somerset | |||||||||||||||||||
Bond | Bond | Securities | European | Opportunities | Emerging | |||||||||||||||||||
Fund | Fund | Fund | Equity Fund | Fund | Markets Fund | |||||||||||||||||||
Cost of investments | $ | 182,479,542 | $ | 305,556,921 | $ | 428,171,845 | $ | 1,081,048,083 | $ | 849,395,578 | $ | 522,108,120 | ||||||||||||
Gross unrealized appreciation | 2,529,729 | 3,460,423 | 1,883,830 | 297,881,566 | 262,306,373 | 182,270,695 | ||||||||||||||||||
Gross unrealized depreciation | (1,546,613 | ) | (2,211,096 | ) | (3,557,672 | ) | (26,483,295 | ) | (18,961,049 | ) | (29,347,123 | ) | ||||||||||||
Net unrealized app (dep) | $ | 983,116 | $ | 1,249,327 | $ | (1,673,842 | ) | $ | 271,398,271 | $ | 243,345,324 | $ | 152,923,572 | |||||||||||
Macquarie | ||||||||||||||||||||||||
Asia New | ||||||||||||||||||||||||
Stars Fund | ||||||||||||||||||||||||
Cost of investments | $ | 259,989,416 | ||||||||||||||||||||||
Gross unrealized appreciation | 39,299,996 | |||||||||||||||||||||||
Gross unrealized depreciation | (12,171,689 | ) | ||||||||||||||||||||||
Net unrealized app (dep) | $ | 27,128,307 |
* | Because tax adjustments are calculated annually at the end of the Funds’ fiscal year, the above table does not reflect tax adjustments for the current fiscal year. |
For the previous year’s federal income tax information, please refer to the Notes to Financial Statements section in the Funds’ most recent annual report.
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, 2017 is estimated):
Tax Exempt Income | Ordinary Income | Long-Term Capital Gain^ | ||||||||||||||||||||||
December 31, | June 30, | December 31, | June 30, | December 31, | June 30, | |||||||||||||||||||
Fund | 2017 | 2017 | 2017 | 2017 | 2017 | 2017 | ||||||||||||||||||
Growth Equity | $ | — | $ | — | $ | — | $ | — | $ | 144,115,691 | $ | 147,424,619 | ||||||||||||
Flexible Equity | — | — | 2,075,622 | 1,573,168 | — | — | ||||||||||||||||||
Equity Income | — | — | 1,284,047 | 2,223,795 | 3,329,274 | 3,997,807 | ||||||||||||||||||
Sustainable Growth | — | — | — | — | 8,367,895 | 2,507,623 | ||||||||||||||||||
Mid-Cap Growth | — | N/A | — | N/A | — | N/A | ||||||||||||||||||
Small-Cap Growth | — | — | 2,657,312 | 2,227,897 | 10,276,150 | 11,963,700 | ||||||||||||||||||
Small-Cap Fundamental Value | — | — | 19,877,191 | 3,609,251 | 32,961,278 | 686,156 | ||||||||||||||||||
Global Leaders | — | — | 43,629 | 53,915 | — | — | ||||||||||||||||||
Intermediate Income | — | — | 1,302,618 | 2,972,217 | — | — | ||||||||||||||||||
Total Return | — | — | 1,478,785 | 2,424,000 | — | 101,725 | ||||||||||||||||||
Strategic Bond | — | — | 1,720,819 | 1,658,199 | — | — | ||||||||||||||||||
Sustainable Bond | — | N/A | 102,614 | N/A | — | N/A | ||||||||||||||||||
Maryland Bond | 2,151,447 | 3,777,617 | — | 262,963 | — | 381,305 | ||||||||||||||||||
Tax Exempt Bond | 4,397,257 | 7,094,476 | — | 17,897 | — | — | ||||||||||||||||||
Mortgage Securities | — | — | 3,818,701 | 10,242,951 | — | — | ||||||||||||||||||
WMC Strategic European Equity | — | — | 11,692,697 | 12,612,291 | — | — | ||||||||||||||||||
WMC Japan Alpha Opportunities | — | — | — | — | 89,959,697 | — | ||||||||||||||||||
Somerset Emerging Markets | — | — | 6,156,538 | 6,508,402 | — | — | ||||||||||||||||||
Macquarie Asia New Stars | — | — | 891,379 | — | — | — |
^ Designated as a long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3).
127
Notes to Financial Statements
December 31, 2017 (Unaudited)
At June 30, 2017, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
Growth | Flexible | Equity | Sustainable | Small-Cap | Small-Cap | |||||||||||||||||||
Equity | Equity | Income | Growth | Growth | Fundamental | |||||||||||||||||||
Fund | Fund | Fund | Fund | Fund | Value Fund | |||||||||||||||||||
Net unrealized app (dep) | $ | 604,383,230 | $ | 125,091,161 | $ | 37,462,582 | $ | 127,429,487 | $ | 127,031,040 | $ | 276,486,161 | ||||||||||||
Undistributed income | — | 1,031,757 | 306,381 | — | — | 16,074,525 | ||||||||||||||||||
Undistributed capital gains | 119,373,274 | — | 3,329,259 | 8,366,265 | 6,763,267 | 18,486,869 | ||||||||||||||||||
Total distributable earnings | 119,373,274 | 1,031,757 | 3,635,640 | 8,366,265 | 6,763,267 | 34,561,394 | ||||||||||||||||||
Other accumulated losses | (848,321 | ) | (172,112 | ) | — | (468,926 | ) | (2,109,980 | ) | — | ||||||||||||||
Total earnings (losses) | $ | 722,908,183 | $ | 125,950,806 | $ | 41,098,222 | $ | 135,326,826 | $ | 131,684,327 | $ | 311,047,555 | ||||||||||||
Global | Intermediate | Total | Strategic | Maryland | Tax Exempt | |||||||||||||||||||
Leaders | Income | Return | Bond | Bond | Bond | |||||||||||||||||||
Fund | Fund | Fund | Fund | Fund | Fund | |||||||||||||||||||
Net unrealized app (dep) | $ | 7,115,959 | $ | (468,433 | ) | $ | 242,865 | $ | 544,775 | $ | 1,334,458 | $ | (344,845 | ) | ||||||||||
Undistributed income | 36,421 | 8,678 | 173,151 | 135,751 | 259,010^ | 518,207^ | ||||||||||||||||||
Undistributed capital gains | — | — | — | — | — | — | ||||||||||||||||||
Total distributable earnings | 36,421 | 8,678 | 173,151 | 135,751 | 259,010^ | 518,207^ | ||||||||||||||||||
Other accumulated losses | (1,550,891 | ) | (219,927 | ) | (663,993 | ) | (3,255,998 | ) | (666,782 | ) | (2,801,772 | ) | ||||||||||||
Total earnings (losses) | $ | 5,601,489 | $ | (679,682 | ) | $ | (247,977 | ) | $ | (2,575,472 | ) | $ | 926,686 | $ | (2,628,410 | ) | ||||||||
WMC Japan | ||||||||||||||||||||||||
Mortgage | WMC Strategic | Alpha | Somerset | Macquarie | ||||||||||||||||||||
Securities | European | Opportunities | Emerging | Asia New | ||||||||||||||||||||
Fund | Equity Fund | Fund | Markets Fund | Stars Fund | ||||||||||||||||||||
Net unrealized app (dep) | $ | (1,720,226 | ) | $ | 195,746,563 | $ | 135,392,708 | $ | 87,710,698 | $ | 10,219,577 | |||||||||||||
Undistributed income | 538,812 | 11,692,431 | — | 4,336,702 | 884,945 | |||||||||||||||||||
Undistributed capital gains | — | — | 89,958,859 | — | — | |||||||||||||||||||
Total distributable earnings | 538,812 | 11,692,431 | 89,958,859 | 4,336,702 | 884,945 | |||||||||||||||||||
Other accumulated losses | (7,226,396 | ) | (38,795,102 | ) | 210,471 | (51,514,030 | ) | (23,105,795 | ) | |||||||||||||||
Total earnings (losses) | $ | (8,407,810 | ) | $ | 168,643,892 | $ | 225,562,038 | $ | 40,533,370 | $ | (12,001,273 | ) |
^ 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, 2017. At the time a Fund purchases or enters into a futures contract, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the terms of the contract. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the 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 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 use of long futures contracts by the Funds subjects them to a risk of loss in excess of the notional amounts shown on the Statements of Assets and Liabilities and up to the total notional amount of the futures contract as shown in the Schedule of Investments. The use of short futures contracts by the Funds subjects them to a risk of loss in excess of the notional amounts shown on the Statements of Assets and Liabilities and, hypothetically, up to an unlimited amount of loss that could exceed the notional amounts of the futures contracts as shown in the Schedules of Investments.
128
Notes to Financial Statements
December 31, 2017 (Unaudited)
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, 2017 | period ended December 31, 2017 | |||||||||||||||
Net Change | ||||||||||||||||
in Unrealized | ||||||||||||||||
Gross Unrealized | Gross Unrealized | Net Realized | Appreciation | |||||||||||||
Appreciation – | Depreciation – | Gain (Loss) – | (Depreciation) – | |||||||||||||
Fund | Futures Contacts | Futures Contacts | Futures Contacts | Futures Contacts | ||||||||||||
Total Return | $ | 82,599 | $ | — | $ | 392,274 | $ | (51,011 | ) | |||||||
Strategic Bond | 46,402 | — | 125,776 | 20,330 | ||||||||||||
Sustainable Bond | 9,605 | — | 22,160 | 9,605 | ||||||||||||
Mortgage Securities | 70,949 | 58,358 | (329,377 | ) | 90,810 | |||||||||||
WMC Japan Alpha Opportunities | 746,988 | — | 1,990,246 | 509,832 |
During the six months ended December 31, 2017, 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 $15,858,157, $627,075, $28,829,009 and $31,917,527, 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, denominated in Japanese Yen, which gave the Fund exposure to foreign currency risk and Japanese equity risk.
During the six months ended December 31, 2017, the average notional value of the short futures contracts held by the Total Return Fund, the Strategic Bond Fund, the Sustainable Bond Fund, and the Mortgage Securities Fund were $5,030,263, $17,034,633, $1,271,615, and $1,744,960, 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.
Offsetting Assets & Liabilities – Futures Contracts
To facilitate the Funds investment in futures contracts, the Funds have entered into agreements with counterparties that dictate the terms under which the Funds and the counterparty will enter into such agreements. Under these agreements, both the Funds and the counterparty may be allowed to combine amounts owed to or receivable from the other and settle all outstanding obligations on a “net basis.” In order to facilitate comparability amongst different funds, the table below shows what the Funds’ Statement of Assets and Liabilities accounts related to futures contracts would look like if they choose to offset, or present on a net basis, assets and liabilities related to futures contracts.
129
Notes to Financial Statements
December 31, 2017 (Unaudited)
Assets: | ||||||||||||||||||||||||
Gross Amounts | Net Amounts | Gross Amounts Not Offset | ||||||||||||||||||||||
Gross | Offset in the | Presented in | in the Statement of | |||||||||||||||||||||
Amounts of | Statement | the Statement | Assets & Liabilities | |||||||||||||||||||||
Recognized | of Assets | of Assets | Financial | Collateral | ||||||||||||||||||||
Unrealized Appreciation on Futures Contracts | Assets | & Liabilities | & Liabilities | Instruments | Received | Net Amount | ||||||||||||||||||
Total Return Fund | $ | 82,599 | $ | — | $ | 82,599 | $ | — | $ | — | $ | 82,599 | ||||||||||||
Strategic Bond Fund | 46,402 | — | 46,402 | — | — | 46,402 | ||||||||||||||||||
Sustainable Bond Fund | 9,605 | — | 9,605 | — | — | 9,605 | ||||||||||||||||||
Mortgage Securities Fund | 70,949 | (58,358 | ) | 12,591 | — | — | 12,591 | |||||||||||||||||
WMC Japan Alpha Opportunities Fund | 746,988 | — | 746,988 | — | — | 746,988 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Gross Amounts | Net Amounts | Gross Amounts Not Offset | ||||||||||||||||||||||
Gross | Offset in the | Presented in | in the Statement of | |||||||||||||||||||||
Amounts of | Statement | the Statement | Assets & Liabilities | |||||||||||||||||||||
Recognized | of Assets | of Assets | Financial | Collateral | ||||||||||||||||||||
Unrealized Depreciation on Futures Contracts | Liabilities | & Liabilities | & Liabilities | Instruments | Pledged | Net Amount | ||||||||||||||||||
Total Return Fund | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Strategic Bond Fund | — | — | — | — | — | — | ||||||||||||||||||
Sustainable Bond Fund | — | — | — | — | — | — | ||||||||||||||||||
Mortgage Securities Fund | 58,358 | (58,358 | ) | — | — | — | — | |||||||||||||||||
WMC Japan Alpha Opportunities Fund | — | — | — | — | — | — |
Note 7. Line of Credit
As of December 31, 2017, 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, 2017 was 4.50% (prime rate). The following table shows the details of the Funds’ borrowing activity during the six months ended December 31, 2017. Funds that are not listed did not utilize the line of credit during the period.
Maximum | ||||
Outstanding | Average Daily | Total Interest | Average | |
Fund | Balance | Balance | Incurred | Interest Rate |
Macquarie Asia New Stars | $322,000 | $5,250 | $114 | 4.25% |
As of December 31, 2017, none of the Funds had any amounts outstanding under the line of credit.
130
Expense Example For the Six Months Ended December 31, 2017 (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, 2017 – December 31, 2017).
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, 2017 | December 31, 2017 | the Period* | December 31, 2017 | the Period* | Ratio* | ||
Growth Equity Fund | |||||||
Institutional Shares | $1,000.00 | $1,131.00 | $3.87 | $1,021.58 | $3.67 | 0.72% | |
Investor Shares | $1,000.00 | $1,129.90 | $4.67 | $1,020.82 | $4.43 | 0.87% | |
Advisor Shares | $1,000.00 | $1,128.30 | $6.01 | $1,019.56 | $5.70 | 1.12% | |
Flexible Equity Fund | |||||||
Institutional Shares | $1,000.00 | $1,126.70 | $3.86 | $1,021.58 | $3.67 | 0.72% | |
Investor Shares | $1,000.00 | $1,125.80 | $4.66 | $1,020.82 | $4.43 | 0.87% | |
Advisor Shares | $1,000.00 | $1,124.40 | $6.00 | $1,019.56 | $5.70 | 1.12% | |
Equity Income Fund | |||||||
Institutional Shares | $1,000.00 | $1,102.30 | $4.03 | $1,021.37 | $3.87 | 0.76% | |
Investor Shares | $1,000.00 | $1,100.70 | $4.82 | $1,020.62 | $4.63 | 0.91% | |
Advisor Shares | $1,000.00 | $1,099.50 | $6.14 | $1,019.36 | $5.90 | 1.16% | |
Sustainable Growth Fund | |||||||
Institutional Shares | $1,000.00 | $1,119.40 | $3.90 | $1,021.53 | $3.72 | 0.73% | |
Investor Shares | $1,000.00 | $1,118.30 | $4.70 | $1,020.77 | $4.48 | 0.88% | |
Advisor Shares | $1,000.00 | $1,117.10 | $6.03 | $1,019.51 | $5.75 | 1.13% |
131
Expense Example For the Six Months Ended December 31, 2017 (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, 2017 | December 31, 2017 | the Period* | December 31, 2017 | the Period* | Ratio* | ||
Mid-Cap Growth Fund | |||||||
Investor Shares | $1,000.00 | $1,028.00 | $2.13^ | $1,020.92 | $4.33 | 0.85% | |
Small-Cap Growth Fund | |||||||
Institutional Shares | $1,000.00 | $1,073.10 | $5.12 | $1,020.27 | $4.99 | 0.98% | |
Investor Shares | $1,000.00 | $1,072.20 | $5.90 | $1,019.51 | $5.75 | 1.13% | |
Advisor Shares | $1,000.00 | $1,070.90 | $7.20 | $1,018.25 | $7.02 | 1.38% | |
Small-Cap Fundamental Value Fund | |||||||
Institutional Shares | $1,000.00 | $1,094.00 | $5.12 | $1,020.32 | $4.94 | 0.97% | |
Investor Shares | $1,000.00 | $1,093.40 | $5.91 | $1,019.56 | $5.70 | 1.12% | |
Advisor Shares | $1,000.00 | $1,091.80 | $7.22 | $1,018.30 | $6.97 | 1.37% | |
Global Leaders Fund | |||||||
Investor Shares | $1,000.00 | $1,134.90 | $4.57 | $1,020.92 | $4.33 | 0.85% | |
Intermediate Income Fund | |||||||
Investor Shares | $1,000.00 | $1,006.80 | $2.28 | $1,022.94 | $2.29 | 0.45% | |
Advisor Shares | $1,000.00 | $1,005.70 | $3.54 | $1,021.68 | $3.57 | 0.70% | |
Total Return Fund | |||||||
Institutional Shares | $1,000.00 | $1,018.10 | $2.54 | $1,022.68 | $2.55 | 0.50% | |
Investor Shares | $1,000.00 | $1,017.90 | $2.80 | $1,022.43 | $2.80 | 0.55% | |
Strategic Bond Fund | |||||||
Investor Shares | $1,000.00 | $1,015.20 | $3.56 | $1,021.68 | $3.57 | 0.70% | |
Advisor Shares | $1,000.00 | $1,013.90 | $4.82 | $1,020.42 | $4.84 | 0.95% | |
Sustainable Bond Fund | |||||||
Investor Shares | $1,000.00 | $1,002.40 | $2.40# | $1,022.18 | $3.06 | 0.60% | |
Maryland Bond Fund | |||||||
Investor Shares | $1,000.00 | $1,009.90 | $2.43 | $1,022.79 | $2.45 | 0.48% | |
Tax Exempt Bond Fund | |||||||
Investor Shares | $1,000.00 | $1,020.90 | $2.45 | $1,022.79 | $2.45 | 0.48% | |
Mortgage Securities Fund | |||||||
Institutional Shares | $1,000.00 | $1,009.10 | $2.43 | $1,022.79 | $2.45 | 0.48% | |
Investor Shares | $1,000.00 | $1,009.80 | $2.68 | $1,022.53 | $2.70 | 0.53% | |
WMC Strategic European Equity Fund | |||||||
Institutional Shares | $1,000.00 | $1,079.90 | $5.61 | $1,019.81 | $5.45 | 1.07% | |
Investor Shares | $1,000.00 | $1,078.70 | $6.39 | $1,019.06 | $6.21 | 1.22% | |
Advisor Shares | $1,000.00 | $1,077.40 | $7.70 | $1,017.80 | $7.48 | 1.47% | |
WMC Japan Alpha Opportunities Fund | |||||||
Institutional Shares | $1,000.00 | $1,141.20 | $6.31 | $1,019.31 | $5.96 | 1.17% | |
Investor Shares | $1,000.00 | $1,140.80 | $7.12 | $1,018.55 | $6.72 | 1.32% | |
Advisor Shares | $1,000.00 | $1,139.90 | $8.47 | $1,017.29 | $7.98 | 1.57% | |
Somerset Emerging Markets Fund | |||||||
Institutional Shares | $1,000.00 | $1,115.90 | $6.13 | $1,019.41 | $5.85 | 1.15% | |
Investor Shares | $1,000.00 | $1,114.50 | $6.93 | $1,018.65 | $6.61 | 1.30% | |
Advisor Shares | $1,000.00 | $1,112.50 | $8.25 | $1,017.39 | $7.88 | 1.55% | |
Macquarie Asia New Stars Fund | |||||||
Institutional Shares | $1,000.00 | $1,105.80 | $7.96 | $1,017.64 | $7.63 | 1.50% | |
Investor Shares | $1,000.00 | $1,105.10 | $8.75 | $1,016.89 | $8.39 | 1.65% |
* | 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). |
^ | Commenced operations on October 2, 2017. Actual expense information is presented for the period from October 2, 2017 to December 31, 2017 (91 days). |
# | Commenced operations on August 7, 2017. Actual expense information is presented for the period from August 7, 2017 to December 31, 2017 (147 days). |
132
Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New 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 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. 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; (3) the approval of the continuation of the Sub-Investment Advisory Agreement with respect to the Brown Advisory Global Leaders Fund; (4) the approval of the continuation of the Sub-Investment Advisory Agreement with respect to the Brown Advisory-Macquarie Asia New Stars Fund; (5) the approval of the adoption of the Investment Advisory Agreement for the Brown Advisory Mid-Cap Growth Fund; and (6) the approval of the adoption of the Investment Advisory Agreement for the Brown Advisory Sustainable Bond Fund.
1. Board of Trustees Approval of the Continuation of the Investment Advisory Agreement for Each of the Funds
In determining whether to approve the continuation of the Investment Advisory Agreement with respect to each of the 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 12, 2017. 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, 2018.
Following their review and consideration, the Trustees determined that the continuation of the Investment Advisory Agreement with respect to each of the Funds was advisable and would enable shareholders of the Funds to continue to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of the Funds and their shareholders. Accordingly, the Board, including those Trustees who are not considered to be “interested persons” of the Trust, as that term is defined in the 1940 Act (the “Independent Trustees”), unanimously approved the continuation of the Investment Advisory Agreement. In reaching their decision, the Trustees requested and obtained from the Adviser such information as they deemed reasonably necessary to evaluate the Investment Advisory Agreement. The Trustees also carefully considered the profitability data and comparative fee, expense and performance information prepared for their use. In considering the continuation of the Investment Advisory Agreement with respect to each applicable Fund, the Trustees evaluated a number of factors that they believed, in light of their reasonable business judgment, to be relevant. They based their decision on the following considerations, among others, although they did not identify any one specific consideration or any particular information that was controlling of their decision:
The nature, extent and quality of the advisory services provided. The Trustees concluded that Brown Advisory is capable of providing high quality services to the Funds, as indicated by the nature, extent and quality of the services provided in the past by Brown Advisory to each of the Funds, Brown Advisory’s management capabilities demonstrated with respect to the Funds, the
133
Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
professional qualifications and experience of each of the portfolio managers of the Funds, Brown Advisory’s investment management and compliance oversight processes, and the competitive investment performance of the Funds. On the basis of the Trustees’ assessment of the nature, extent and quality of the advisory services provided by Brown Advisory, the Trustees concluded that Brown Advisory is capable of generating a level of long-term investment performance that is appropriate in light of the Funds’ investment objectives, policies and strategies and is competitive with many other comparable investment companies.
The Board received and reviewed performance information for each of the Funds separately, including performance information for applicable one-, three-, five- and ten-year periods ended June 30, 2017, 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, 2017. 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, 2017. 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-year period ended June 30, 2017, but had underperformed its primary benchmark index for the three-, five-, and ten-year periods ended June 30, 2017. The Board noted that the Institutional Shares of the Fund had underperformed its peer group median for the three- and ten-year periods ended June 30, 2017, but had outperformed its peer group median for the one- and five-year periods ended June 30, 2017. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
3. Growth Equity Fund
The Board then reviewed information and materials regarding the performance results for the Growth Equity Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Russell 1000 Growth Index, for the one-, three-, five-, and ten-year periods ended June 30, 2017. 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, 2017, but had outperformed its peer group median for the ten-year period ended June 30, 2017. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
4. Small-Cap Fundamental Value Fund
The Board then reviewed information and materials regarding the performance results for the Small-Cap Fundamental Value Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Russell 2000 Value Index, for the one-year period ended June 30, 2017, performed in line with its primary benchmark index for the three-year period ended June 30, 2017, and outperformed its primary benchmark index for the five-year period ended June 30, 2017. 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, 2017, but had underperformed its peer group median for the one-year period ended June 30, 2017.
5. Small-Cap Growth Fund
The Board next reviewed information and materials regarding the performance results for the Small-Cap Growth Fund, noting that the Investor Shares of the Fund had outperformed its primary benchmark index, the Russell 2000 Growth Index, for the three-, five-, and ten-year periods ended June 30, 2017, but had underperformed its primary benchmark index for the one-year period ended June 30, 2017. 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, 2017, but had underperformed its peer group median for the one-year period ended June 30, 2017.
134
Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
6. Sustainable Growth Fund
The Board next reviewed information and materials regarding the performance results for the Sustainable Growth Fund, noting that the Investor Shares of the Fund had outperformed its primary benchmark index, the Russell 1000 Growth Index, for the three- and five-year periods ended June 30, 2017, but had underperformed its primary benchmark index for the one-year period ended June 30, 2017. 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, 2017, but had underperformed its peer group median for the one-year period ended June 30, 2017.
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-year period ended June 30, 2017, but had underperformed its primary benchmark index for the three-, five-, and ten-year periods ended June 30, 2017. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one-, three-, five-, and ten-year periods ended June 30, 2017. 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 underperformed its primary benchmark index, the Bloomberg Barclays 1-10 Year Blended Municipal Bond Index, for the one-, three-, five-, and ten-year periods ended June 30, 2017. The Board noted that the Investor Shares of the Fund had outperformed its peer group median for the one-, three-, five-, and ten-year periods ended June 30, 2017. The members of the Board considered and discussed the factors contributing to the Fund’s 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 Advisor Shares of the Fund had outperformed its primary benchmark index, the Bloomberg Barclays Intermediate US Aggregate Bond Index, for the one-year period ended June 30, 2017, but had underperformed its primary benchmark index for the three- and five-year periods ended June 30, 2017. The Board noted that the Investor Shares of the Fund had underperformed its peer group median for the one- and three-year periods ended June 30, 2017, but had outperformed its peer group median for the five-year period ended June 30, 2017.
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 underperformed 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, 2017. The Board noted that the Investor Shares of the Fund had outperformed its peer group median for the three- and five-year periods ended June 30, 2017, but had underperformed its peer group median for the one-year period ended June 30, 2017. The members of the Board considered and discussed the factors contributing to the Fund’s underperformance and they reviewed them with the Adviser.
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 Investor Shares of the Fund had underperformed its primary benchmark index, the MSCI Emerging Markets Index, for the one- and three-year periods ended June 30, 2017. The Board also noted that the Institutional Shares of the Fund had underperformed its peer group median for the one- and three-year periods ended June 30, 2017. 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 Investor Shares of the Fund had outperformed its primary benchmark index, the MSCI Europe Index, for the one- and three-year periods ended June 30, 2017. 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, 2017.
135
Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
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 Investor Shares of the Fund had outperformed its primary benchmark index, the TOPIX Total Return Index, for the one-year period ended June 30, 2017, but had underperformed its primary benchmark index for the three-year period ended June 30, 2017. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-year period ended June 30, 2017, but had underperformed its peer group median for the three-year period ended June 30, 2017.
14. Mortgage Securities Fund
The Board next reviewed information and materials regarding the performance results for the Mortgage Securities Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the Bloomberg Barclays Mortgage Backed Securities Index, for the one- and three-year periods ended June 30, 2017. 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, 2017.
15. Total Return Fund
The Board then reviewed information and materials regarding the performance results for the Total Return Fund, noting that the Investor Shares of the Fund had outperformed its primary benchmark index, the Bloomberg Barclays US Aggregate Bond Index, for the one-year period ended June 30, 2017. The Board noted that the Institutional Shares of the Fund had outperformed its peer group median for the one-year period ended June 30, 2017. The Board also noted that, because the Fund commenced operations in October 2014, the Fund has a relatively short performance history.
16. Macquarie Asia New Stars Fund
The Board next reviewed information and materials regarding the performance results for the Macquarie Asia New Stars Fund, noting that the Investor Shares of the Fund had underperformed its primary benchmark index, the MSCI AC Asia ex Japan SMID Cap Index, for the one-year period ended June 30, 2017. The Board noted that the Institutional Shares of the Fund had underperformed its peer group median for the one-year period ended June 30, 2017. The Board also noted that, because the Fund commenced operations in November 2014, the Fund has a relatively short performance history.
17. Global Leaders Fund
The Board then 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, 2017. The Board noted that the Investor Shares of the Fund had outperformed its peer group median for the one-year period ended June 30, 2017. The Board also noted that, because the Fund commenced operations in May 2014, the Fund has a relatively short performance history.
The cost of advisory services provided and the level of profitability. The Board also considered the advisory fees and overall expenses of the Funds as compared to the advisory fees and overall expenses of other mutual funds in each Fund’s peer group, as well as profitability information with respect to Brown Advisory’s management and operation of the Funds. On the basis of this comparative information, the Trustees determined that the overall advisory fees and expense ratios of the Funds are competitive with industry averages. The Trustees noted that Brown Advisory had proposed the continuation of their contractual commitment for the benefit of shareholders of the Funds to limit the Funds’ operating expenses through October 31, 2018, subject to recoupment by the Adviser of certain amounts under specified circumstances.
The Board also considered Brown Advisory’s level of profitability with respect to each of the Funds, and noted that Brown Advisory’s level of profitability was acceptable and not unreasonable. The Board reviewed the extent to which Brown Advisory uses its own financial resources to help promote and market the Funds in order to support various components of the distribution efforts of the Funds. In considering the profitability of Brown Advisory from their operation of the Funds, the Trustees considered the level of profitability realized by Brown Advisory before the imposition of any distribution and marketing expenses incurred by the firm from its own resources. The Board also considered information regarding the fees that Brown Advisory charges to its other clients for investment advisory services that are similar to the advisory services provided to the Funds and the Board noted that the fees charged to the Funds by the Adviser were reasonable in light of the nature of the services provided by the Adviser to
136
Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
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 Institutional Shares of those Funds having Institutional Shares outstanding as compared to the advisory fees and overall expenses (excluding Rule 12b-1 fees) of other mutual funds in each Fund’s peer group, and as compared to the Investor Shares for those Funds that do not have Institutional Shares outstanding, 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.
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 0.73%, which was lower than the median net expense ratio of its peer funds.
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 0.72%, which was lower than the median net expense ratio of its peer funds.
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 higher than 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.
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.
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New 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 0.49%, 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. The Board also noted that the net expense ratio of the Fund’s Investor Shares was 0.70%, 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 0.49%, which was higher 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 1.17%, 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 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 1.09%, which matched 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 matched 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 0.46%, 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 0.51%, which was lower than the median net expense ratio of its peer funds.
16. Macquarie Asia New Stars Fund
The Board next reviewed expense information and materials for the Macquarie Asia New Stars Fund, noting that the Investment Advisory Agreement provided for a 1.25% investment advisory fee for the Fund, which was above the median compared to its
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
peer funds. The Board also noted that the net expense ratio of the Fund’s Institutional Shares was 1.55%, which was higher than the median net expense ratio of its peer funds.
17. 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.
The extent to which economies of scale may be realized as the Funds grow and whether the advisory fees reflect possible economies of scale. While it was noted that the Funds’ investment advisory fees will not decrease as the Funds’ assets grow because they are not subject to investment advisory fee breakpoints, the Trustees concluded that the Funds’ investment advisory fees are appropriate in light of the size of the Funds, and appropriately reflect the current economic environment for Brown Advisory and the competitive nature of the mutual fund marketplace. The Trustees took into consideration that Brown Advisory 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. The Trustees also noted that the Funds’ advisory fees are competitive against their peers. The Trustees further noted that they will have the opportunity to periodically re-examine whether any of the Funds have achieved economies of scale, and the appropriateness of investment advisory fees payable to Brown Advisory with respect to the Funds, in the future at which time the implementation of fee breakpoints on applicable Funds could be considered further.
Benefits to Brown Advisory from its relationship with the Funds (and any corresponding benefits to the Funds). The Trustees concluded that other benefits that may be derived by Brown Advisory from its relationship with the Funds, including “soft dollar” benefits in connection with Fund brokerage transactions and use of the Funds’ performance track record in advertising materials, are reasonable and fair, and consistent with industry practice and the best interests of the Funds and their shareholders. In addition, the Trustees determined that the Funds benefit from their relationship with Brown Advisory by virtue of Brown Advisory’s provision of business management and shareholder services, in addition to investment advisory services, at a cost to the Funds that is generally comparable to the costs of an outside service provider, which the Trustees had previously determined to be reasonable, fair and in the best interests of the shareholders of the Funds in light of the nature and quality of the services provided and the necessity of the services for the Funds’ operations.
Other Considerations. In approving the continuation of the Investment Advisory Agreement, the Trustees determined that Brown Advisory has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to manage the Funds in a professional manner that is consistent with the best interests of the Funds and their shareholders. The Board also acknowledged the experience and expertise of members of the Brown Advisory senior management team and the focus these individuals have on ensuring that the Funds operate successfully. The Trustees also concluded that Brown Advisory has made a significant entrepreneurial commitment to the management and success of the Funds, which entails a substantial financial and professional commitment, including the Expense Limitation Agreement under which Brown Advisory has undertaken to waive a portion of its fees and to reimburse expenses of the Funds to the benefit of Fund 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
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
previously considered and approved at a prior meeting based upon a finding that the business management fees charged are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality.
In reaching their conclusion with respect to the approval of the of the continuation of the Investment Advisory Agreement and the level of fees paid under the Agreement, the Trustees did not identify any one single factor as being controlling, but rather, the Board took note of a combination of factors that had influenced their decision making process. They noted the level and quality of the investment advisory services provided by Brown Advisory to each of the Funds in the Trust, and they found that these services will continue to benefit the Funds and their shareholders and also reflected the Adviser’s overall commitment to the continued growth and development of the Funds.
Based upon their review and consideration of these factors and other matters deemed relevant by the Board in reaching an informed business judgment, a majority of the Board of Trustees, including a majority of the Independent Trustees, concluded that the terms of the Investment Advisory Agreement, were fair and reasonable and the Board voted to renew the Investment Advisory Agreement with respect to the Funds for an additional one-year period.
2. Board of Trustees Approval of the Continuation of the Sub-Investment Advisory Agreement With Respect to the Brown Advisory-Somerset Emerging Markets Fund
The 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 12, 2017.
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
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
of the nature, extent and quality of the sub-advisory services provided by Somerset, the Trustees concluded that Somerset is capable of generating a level of long-term investment performance that is appropriate in light of the Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
The cost of advisory services provided and the expected level of profitability. On the basis of comparative information derived from the data that had been provided to the Board members, the Trustees determined that the expense ratios for each respective class of shares of the Fund are competitive with industry averages. The Trustees also noted that the Fund is subject to a contractual expense limitation agreement for the benefit of shareholders of the Fund to limit the Fund’s operating expenses through October 31, 2018. 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 12, 2017.
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
In accordance with the Investment Company Act of 1940, the Board of Trustees was required to consider the approval of the continuation of each of the Sub-Investment Advisory Agreements, and this was required to take place at an in-person meeting of the Board. The relevant provisions of the Investment Company Act of 1940 specifically provide that it is the duty of the Board to request and evaluate such information as the Board determines is necessary to allow them to properly consider the approval of the continuation of the Sub-Advisory Agreements, and it is the duty of the Adviser and Wellington, as applicable, to furnish the Trustees with such information that is responsive to their request.
Accordingly, in determining whether to approve the continuation each of the Sub-Investment Advisory Agreements between Brown Advisory and Wellington, the Board of Trustees requested, and the Adviser and Wellington provided, information and data relevant to the Board’s consideration.
The Board then undertook the consideration of various matters with respect to the proposed approval of the continuation of each of the Sub-Investment Advisory Agreements between Brown Advisory and Wellington. The Trustees considered various matters involving the respective services provided by each of the Adviser and Wellington in connection with the management and operation of each of the Funds and they took note of the extensive oversight duties performed by the Adviser including investment management and compliance oversight of the operations of Wellington. The Trustees considered that the Adviser is actively engaged in conducting an ongoing monitoring program involving Wellington’s investment activities with respect to Wellington’s day-to-day portfolio management of each Fund’s assets in order to make sure that Wellington is adhering to all of the stated investment objectives, policies, limitations and restrictions that each Fund is subject to. In addition, the Trustees also took note of the fact that in connection with the Adviser’s oversight of the investment program maintained by Wellington with respect to each of the Funds, the Adviser prepares extensive reports to the Board regarding the investment activities of Wellington, which reports contain detailed analyses of how Wellington is performing.
The Board reviewed and evaluated the information that the Adviser and Wellington had presented for the Board’s review. The Board particularly noted, among other considerations, that each respective Fund’s investment advisory fees and overall operating expenses were competitive with comparable mutual funds. The Board also took into account presentations made by Wellington and the Adviser throughout the year. Based on its review of all of the information, the Board determined that each of the Sub-Investment Advisory Agreements was consistent with the best interests of the respective Funds and their shareholders and would enable each of the Funds to continue to receive high quality sub-advisory services at a cost that is appropriate, reasonable, and in the best interests of each of the Funds and their respective shareholders. In reaching these conclusions, the Board considered the following:
The nature, extent and quality of the sub-investment advisory services provided. The Trustees concluded that Wellington is capable of providing high quality sub-advisory services to each of the Funds as indicated by the professional qualifications and experience of the respective portfolio managers of the Funds, and Wellington’s investment management processes. On the basis of the Trustees’ assessment of the nature, extent and quality of the sub-advisory services provided by Wellington, the Trustees concluded that Wellington is capable of generating a level of long-term investment performance that is appropriate in light of each Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
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, 2018. 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
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
will have the opportunity to periodically re-examine whether either Fund has achieved economies of scale, and the appropriateness of the investment sub-advisory fees with respect to each Fund, in the future at which time the implementation of fee breakpoints on one or both of the Funds could be further considered.
Benefits to Wellington from its relationships with the Funds (and any corresponding benefits to the Funds). The Trustees concluded that other benefits that may be derived by Wellington from its relationships with the Funds, including any potential “soft dollar” benefits in connection with each Fund’s brokerage transactions and use of each Fund’s performance track record in advertising materials, are reasonable and fair, and consistent with industry practice and the best interests of the Fund and its shareholders.
Other Considerations. In approving the continuation of the Sub-Investment Advisory Agreements, the Trustees determined that Wellington has made a substantial commitment to the recruitment and retention of high quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to provide sub-advisory services to the Funds in a professional manner that is consistent with the best interests of the Funds and their shareholders. The Board also considered matters with respect to the brokerage practices of Wellington, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
It was noted that in making their determinations, the Trustees had considered and relied upon the materials provided to them by Wellington with respect to the contracts and the presentation of the representatives of Brown Advisory. In reaching their conclusion with respect to the approval of the continuation of the Sub-Investment Advisory Agreements and the level of fees paid under the Agreements, the Trustees did not identify any one single factor as being controlling, rather, the Trustees took note of a combination of factors that had influenced their decision making process. They noted the level and quality of investment advisory services provided by Wellington to the Funds and determined that 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 12, 2017 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
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
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 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, 2018. 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
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
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.
5. Board of Trustees Approval of the Continuation of the Sub-Investment Advisory Agreement With Respect to the Brown Advisory-Macquarie Asia New Stars Fund
The continuation of the Sub-Investment Advisory Agreement with respect to the Brown Advisory-Macquarie Asia New Stars Fund (the “Fund”) between Brown Advisory and Macquarie Funds Management Hong Kong Limited, the sub-investment adviser to the Fund (“Macquarie Hong Kong”), was also approved by the Board of Trustees at the Board meeting held on September 12, 2017.
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 Macquarie Hong Kong, 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 Macquarie Hong Kong, the Board of Trustees requested, and Brown Advisory and Macquarie Hong Kong 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 Macquarie Hong Kong. The Trustees considered various matters involving the respective services provided by each of Brown Advisory and Macquarie Hong Kong 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 Macquarie Hong Kong. The Trustees considered that Brown Advisory is actively engaged in conducting an ongoing monitoring program involving Macquarie Hong Kong’s investment activities with respect to Macquarie Hong Kong’s day-to-day portfolio management of the Fund’s assets in order to make sure that Macquarie Hong Kong 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 Macquarie Hong Kong with respect to the Fund, Brown Advisory prepares extensive reports to the Board regarding the investment activities of Macquarie Hong Kong, which reports contain detailed analyses of how Macquarie Hong Kong is performing. In addition, the Trustees also took into consideration certain changes that had been made during the year to the Fund’s principal investment strategies and services provided by Macquarie Hong Kong with respect to the new principal investment strategies.
The Board reviewed and evaluated the information that Brown Advisory and Macquarie Hong Kong 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 Macquarie Hong Kong 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 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 Macquarie Hong Kong 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 Macquarie Hong Kong’s investment management processes. On the basis of the Trustees’ assessment of the nature, extent and quality of the sub-advisory services provided by Macquarie Hong Kong,
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
the Trustees concluded that Macquarie Hong Kong is capable of generating a level of long-term investment performance that is appropriate in light of the Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
The cost of advisory services provided and the expected level of profitability. On the basis of comparative information derived from the data that had been provided to the Board members, the Trustees determined that the expense ratios for each respective class of shares of the Fund are competitive with industry averages. The Trustees also noted that the Fund is subject to a contractual expense limitation agreement for the benefit of shareholders of the Fund to limit the Fund’s operating expenses through October 31, 2018. The Board took note of the fact that the sub-advisory fee had been separately negotiated by Brown Advisory and Macquarie Hong Kong. Accordingly, on the basis of the Board’s review of the fees charged by Macquarie Hong Kong 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 Macquarie Hong Kong 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 Macquarie Hong Kong from its relationship with the Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by Macquarie Hong Kong from its relationship with the 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 Macquarie Hong Kong 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 Macquarie Hong Kong, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
It was noted that in making their determinations, the Trustees had considered and relied upon the materials provided to them by Macquarie Hong Kong 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 Macquarie Hong Kong 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 Macquarie Hong Kong and they determined that the sub-advisory fee, as negotiated by Brown Advisory and Macquarie Hong Kong, reasonably reflected the nature and extent of the services provided by Macquarie Hong Kong with respect to the Fund.
5. Board of Trustees Approval of the Adoption of the Investment Advisory Agreement With Respect to the Brown Advisory Mid-Cap Growth Fund
At the meeting of the Board held on September 12, 2017, the members of the Board also undertook the consideration of matters with respect to the proposed adoption of the Investment Advisory Agreement with respect to the Mid-Cap Growth Fund (the “Fund”). In accordance with the Investment Company Act of 1940, the Board of Trustees was required to consider the approval of the Investment Advisory Agreement and this was required to take place at an in-person meeting of the Board. The relevant
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
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 adoption of the Agreement, and it is the duty of the Adviser to furnish the Trustees with such information that is responsive to their request.
Accordingly, in determining whether to approve the adoption of the Investment Advisory Agreement between Brown Advisory and the Trust with respect to the Fund, the Board of Trustees requested, and the Adviser provided, information and data relevant to the Board’s consideration. This included materials prepared by the Adviser and by the Funds’ administrator that provided the Board with information regarding the investment performance of the Adviser with respect to the other Funds in the Trust, the Adviser’s performance of a composite of all of those accounts managed by the Adviser having substantially similar investment objectives, policies and strategies as the Fund, and the investment experience and background of the proposed portfolio managers for the Fund, as well as information regarding the estimated fees and expenses of the Fund, as compared to other similar mutual funds.
At this meeting, the Board reviewed with representatives of the Adviser various matters with respect to the proposed management and operation of the Fund, the proposed investment advisory services to be provided to the Fund by the Adviser, the nature and extent of the duties and responsibilities of the Adviser with respect to the Fund, the compliance oversight process involving the Fund and its operations, and the proposed fees and expenses of the Fund. During the meeting representatives of the Adviser made presentations to the Board regarding their proposal to provide investment advisory services to the Fund.
In addition, the Board also considered the adoption of an Expense Limitation Agreement with respect to the Fund which would limit the total operating expenses of the Fund through October 31, 2018, as well as a Business Management Agreement with Brown Advisory pursuant to which Brown Advisory would provide certain business management services to the Fund. At this meeting, representatives of the Adviser reviewed for the members of the Board their experience and background in managing the other Funds in the Trust, and they also reviewed information regarding the investment advisory process proposed to be followed with respect to the Fund.
Following their consideration and review of these matters, the Trustees determined that the adoption of the Investment Advisory Agreement with the Adviser with respect to the Fund would enable shareholders of the Fund to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. Accordingly, the Board, including a majority of the Independent Trustees, unanimously approved the Investment Advisory Agreement for the Fund. In reaching their decision, the Trustees requested and obtained from the Adviser such information as they deemed reasonably necessary to evaluate the Investment Advisory Agreement. The Trustees also carefully considered the projected profitability data and comparative fee, expense and performance information prepared by Trust management. In considering the adoption of the Investment Advisory Agreement with respect to the Fund, the Trustees evaluated a number of factors that they believed, in light of their reasonable business judgment, to be relevant. They based their decision on the following considerations, among others, although they did not identify any one specific consideration or any particular information that was controlling of their decision:
The nature, extent and quality of the advisory services to be provided. The Trustees concluded that Brown Advisory is capable of providing high quality services to the Fund, as indicated by the nature and quality of services provided in the past to the other Funds in the Trust, Brown Advisory’s management capabilities demonstrated with respect to the other Funds in the Trust, the professional qualifications and experience of the members of Brown Advisory’s investment team who will be responsible for the ongoing management of the Fund’s investment program, Brown Advisory’s investment and compliance oversight processes, and the competitive investment performance of the other Funds in the Trust. The Trustees also determined that Brown Advisory proposed to provide investment advisory services that were of the same quality as services provided to the other Funds in the Trust, and that these services are appropriate in scope and extent in light of the Fund’s proposed operations, the competitive landscape of the investment company business and investor needs. On the basis of the Trustees’ assessment of the nature, extent and quality of the advisory services to be provided by Brown Advisory, the Trustees concluded that Brown Advisory is capable of generating a level of long-term investment performance that is appropriate in light of the Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
The cost of advisory services to be provided and the expected level of profitability. On the basis of comparative information derived from the data that was included with the materials provided to the Board at their meeting, the Trustees determined that the overall projected expense ratios for each respective class of shares of the Fund are competitive with industry averages. The Trustees also noted that Brown Advisory had proposed a contractual commitment for the benefit of shareholders of the Fund to
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
limit the Fund’s total operating expenses through October 31, 2018. The Board also focused on Brown Advisory’s projected level of profitability with respect to the Fund, and noted that Brown Advisory’s expected level of profitability was acceptable and not unreasonable. Accordingly, on the basis of the Board’s review of the fees to be charged by Brown Advisory for investment advisory services, the investment advisory services to be provided to the Fund by Brown Advisory, and the estimated level of profitability from Brown Advisory’s relationship with the Fund, the Board concluded that the level of investment advisory fees and Brown Advisory’s projected profitability are appropriate in light of the management fees, overall expense ratios and investment performance of comparable investment companies.
The extent to which economies of scale may be realized as the Fund grows and whether the advisory fees reflect possible economies of scale. While it was noted that the Fund’s investment advisory fees will not decrease as the Fund’s assets grow because they will not be subject to investment advisory fee breakpoints, the Trustees concluded that the Fund’s investment advisory fees are appropriate in light of the projected size of the Fund, and appropriately reflect the current economic environment for Brown Advisory and the competitive nature of the mutual fund marketplace. The Trustees took into consideration that Brown Advisory 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. The Trustees also noted that the Fund’s proposed advisory fees are competitive against the Fund’s peers. The Trustees then noted that they will have the opportunity to periodically re-examine whether the Fund has achieved economies of scale, and the appropriateness of the investment advisory fees payable to Brown Advisory with respect to the Fund, in the future at which time the implementation of fee breakpoints on the Fund could be considered.
Benefits to Brown Advisory from its relationship with the Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by Brown Advisory from its relationship with the 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. In addition, the Trustees determined that the Fund will benefit from its relationship with Brown Advisory by virtue of Brown Advisory’s provision of business management and shareholder services, in addition to investment advisory services, at a cost to the Fund that is generally comparable to the costs of an outside service provider, which the Trustees determined to be reasonable, fair and in the best interests of the shareholders of the Fund in light of the nature and quality of the services to be provided and the necessity of the services for the Fund’s operations.
Other Considerations. In approving the adoption 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 Fund in a professional manner that is consistent with the best interests of the Fund and its shareholders. The Board also considered the proposed level of the investment advisory fees, and the Board determined that the advisory fees fairly compensate Brown Advisory for the services that it is to perform pursuant to the Investment Advisory Agreement. The Trustees also concluded that Brown Advisory has made a significant entrepreneurial commitment to the management and success of the Fund, which entails a substantial financial and professional commitment, including the Expense Limitation Agreement under which Brown Advisory has undertaken to waive a portion of its fees to the benefit of the Fund’s shareholders to the extent necessary in accordance with the terms of the Expense Limitation Agreement. The Board also considered matters with respect to the brokerage practices of Brown Advisory, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
The Board also considered various matters with respect to the proposed distribution and shareholder servicing arrangements applicable to the Fund and they considered the distribution fees and the non-distribution shareholder servicing fees payable with respect to certain of the share classes of the Fund, including certain of such fees which may be payable to the Adviser for the shareholder administrative services that it proposes to provide to shareholders of the Fund. The Board took note of the fact that the non-distribution related shareholder administrative fees payable to the Adviser are intended to compensate the Adviser for providing certain administrative services to those shareholders of the Fund covered by the applicable servicing arrangements in the relevant share classes.
The Board also took into consideration the nature and extent of the business management fees payable to Brown Advisory by the Fund pursuant to which Brown Advisory will provide certain business management services to the Fund, which the Board
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
approved based upon a finding that the business management fees to be charged are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality and based upon the level and quality of business management services provided by Brown Advisory to the other Funds in the Trust.
It was noted that in making their determinations, the Trustees had considered and relied upon the materials provided to them at the Board meeting with respect to the proposed contract and the presentation of the representatives of Brown Advisory. In reaching their conclusion with respect to the approval of the adoption of the Investment Advisory Agreement and the level of fees to be paid under the Agreement, the Trustees did not identify any one single factor as being controlling, rather, the Trustees took note of a combination of factors that had influenced their decision making process. They noted the level and quality of investment advisory services provided by Brown Advisory to each of the other Funds in the Trust, and they found that these services will benefit the Fund and its shareholders and also reflected management’s overall commitment to the growth and development of the Fund.
6. Board of Trustees Approval of the Adoption of the Investment Advisory Agreement With Respect to the Brown Advisory Sustainable Bond Fund
At an in-person meeting of the Board held on May 16, 2017, the members of the Board undertook the consideration of matters with respect to the proposed adoption of the Investment Advisory Agreement with respect to the Sustainable Bond Fund (the “Fund”). In accordance with the Investment Company Act of 1940, the Board of Trustees was required to consider the approval of the 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 adoption of the Agreement, and it is the duty of the Adviser to furnish the Trustees with such information that is responsive to their request.
Accordingly, in determining whether to approve the adoption of the Investment Advisory Agreement between Brown Advisory and the Trust with respect to the Fund, the Board of Trustees requested, and the Adviser provided, information and data relevant to the Board’s consideration. This included materials prepared by the Adviser and by the Funds’ administrator that provided the Board with information regarding the investment performance of the Adviser with respect to the other Funds in the Trust, the Adviser’s performance of a composite of all of those accounts managed by the Adviser having substantially similar investment objectives, policies and strategies as the Fund, and the investment experience and background of the proposed portfolio manager for the Fund, as well as information regarding the estimated fees and expenses of the Fund, as compared to other similar mutual funds.
At this meeting, the Board reviewed with representatives of the Adviser various matters with respect to the proposed management and operation of the Fund, the proposed investment advisory services to be provided to the Fund by the Adviser, the nature and extent of the duties and responsibilities of the Adviser with respect to the Fund, the compliance oversight process involving the Fund and its operations, and the proposed fees and expenses of the Fund. During the meeting representatives of the Adviser made presentations to the Board regarding their proposal to provide investment advisory services to the Fund.
In addition, the Board also considered the adoption of an Expense Limitation Agreement with respect to the Fund which would limit the total operating expenses of the Fund through October 31, 2018, as well as a Business Management Agreement with Brown Advisory pursuant to which Brown Advisory would provide certain business management services to the Fund. At this meeting, representatives of the Adviser reviewed for the members of the Board their experience and background in managing the other Funds in the Trust, and they also reviewed information regarding the investment advisory process proposed to be followed with respect to the Fund.
Following their consideration and review of these matters, the Trustees determined that the adoption of the Investment Advisory Agreement with the Adviser with respect to the Fund would enable shareholders of the Fund to obtain high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. Accordingly, the Board, including a majority of the Independent Trustees, unanimously approved the Investment Advisory Agreement for the Fund. In reaching their decision, the Trustees requested and obtained from the Adviser such information as they deemed reasonably necessary to evaluate the Investment Advisory Agreement. The Trustees also carefully considered the projected profitability data and comparative fee, expense and performance information prepared by Trust management. In considering the adoption of the Investment Advisory Agreement with respect to the Fund, the Trustees evaluated a number of factors that they believed, in light of their reasonable business judgment, to be relevant. They based their decision on the following considerations, among others, although they did not identify any one specific consideration or any particular information that was controlling of their decision:
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
The nature, extent and quality of the advisory services to be provided. The Trustees concluded that Brown Advisory is capable of providing high quality services to the Fund, as indicated by the nature and quality of services provided in the past to the other Funds in the Trust, Brown Advisory’s management capabilities demonstrated with respect to the other Funds in the Trust, the professional qualifications and experience of the members of Brown Advisory’s investment team who will be responsible for the ongoing management of the Fund’s investment program, Brown Advisory’s investment and compliance oversight processes, and the competitive investment performance of the other Funds in the Trust. The Trustees also determined that Brown Advisory proposed to provide investment advisory services that were of the same quality as services provided to the other Funds in the Trust, and that these services are appropriate in scope and extent in light of the Fund’s proposed operations, the competitive landscape of the investment company business and investor needs. On the basis of the Trustees’ assessment of the nature, extent and quality of the advisory services to be provided by Brown Advisory, the Trustees concluded that Brown Advisory is capable of generating a level of long-term investment performance that is appropriate in light of the Fund’s investment objectives, policies and strategies and competitive with many other comparable investment companies.
The cost of advisory services to be provided and the expected level of profitability. On the basis of comparative information derived from the data that was included with the materials provided to the Board at their meeting, the Trustees determined that the overall projected expense ratios for each respective class of shares of the Fund are competitive with industry averages. The Trustees also noted that Brown Advisory had proposed a contractual commitment for the benefit of shareholders of the Fund to limit the Fund’s total operating expenses through October 31, 2018. The Board also focused on Brown Advisory’s projected level of profitability with respect to the Fund, and noted that Brown Advisory’s expected level of profitability was acceptable and not unreasonable. Accordingly, on the basis of the Board’s review of the fees to be charged by Brown Advisory for investment advisory services, the investment advisory services to be provided to the Fund by Brown Advisory, and the estimated level of profitability from Brown Advisory’s relationship with the Fund, the Board concluded that the level of investment advisory fees and Brown Advisory’s projected profitability are appropriate in light of the management fees, overall expense ratios and investment performance of comparable investment companies.
The extent to which economies of scale may be realized as the Fund grows and whether the advisory fees reflect possible economies of scale. While it was noted that the Fund’s investment advisory fees will not decrease as the Fund’s assets grow because they will not be subject to investment advisory fee breakpoints, the Trustees concluded that the Fund’s investment advisory fees are appropriate in light of the projected size of the Fund, and appropriately reflect the current economic environment for Brown Advisory and the competitive nature of the mutual fund marketplace. The Trustees took into consideration that Brown Advisory 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. The Trustees also noted that the Fund’s proposed advisory fees are competitive against the Fund’s peers. The Trustees then noted that they will have the opportunity to periodically re-examine whether the Fund has achieved economies of scale, and the appropriateness of the investment advisory fees payable to Brown Advisory with respect to the Fund, in the future at which time the implementation of fee breakpoints on the Fund could be considered.
Benefits to Brown Advisory from its relationship with the Fund (and any corresponding benefits to the Fund). The Trustees concluded that other benefits that may be derived by Brown Advisory from its relationship with the 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. In addition, the Trustees determined that the Fund will benefit from its relationship with Brown Advisory by virtue of Brown Advisory’s provision of business management and shareholder services, in addition to investment advisory services, at a cost to the Fund that is generally comparable to the costs of an outside service provider, which the Trustees determined to be reasonable, fair and in the best interests of the shareholders of the Fund in light of the nature and quality of the services to be provided and the necessity of the services for the Fund’s operations.
Other Considerations. In approving the adoption 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 Fund in a professional manner that is consistent with the best interests of the Fund and its shareholders. The Board also considered the proposed level of the investment
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Board of Trustees Approval of: (i) the Continuation of the Investment Advisory Agreement for Each of the Funds; (ii) the Continuation of the Sub-Investment Advisory Agreements for Each of the Sub-Advised Funds; and (iii) the Adoption of the Investment Advisory Agreement for Two New Funds
advisory fees, and the Board determined that the advisory fees fairly compensate Brown Advisory for the services that it is to perform pursuant to the Investment Advisory Agreement. The Trustees also concluded that Brown Advisory has made a significant entrepreneurial commitment to the management and success of the Fund, which entails a substantial financial and professional commitment, including the Expense Limitation Agreement under which Brown Advisory has undertaken to waive a portion of its fees to the benefit of the Fund’s shareholders to the extent necessary in accordance with the terms of the Expense Limitation Agreement. The Board also considered matters with respect to the brokerage practices of Brown Advisory, including its soft dollar arrangements and its best-execution procedures, and noted that these were reasonable and consistent with standard industry practice.
The Board also considered various matters with respect to the proposed distribution and shareholder servicing arrangements applicable to the Fund and they considered the distribution fees and the non-distribution shareholder servicing fees payable with respect to certain of the share classes of the Fund, including certain of such fees which may be payable to the Adviser for the shareholder administrative services that it proposes to provide to shareholders of the Fund. The Board took note of the fact that the non-distribution related shareholder administrative fees payable to the Adviser are intended to compensate the Adviser for providing certain administrative services to those shareholders of the Fund covered by the applicable servicing arrangements in the relevant share classes.
The Board also took into consideration the nature and extent of the business management fees payable to Brown Advisory by the Fund pursuant to which Brown Advisory will provide certain business management services to the Fund, which the Board approved based upon a finding that the business management fees to be charged are fair and reasonable in light of the usual and customary charges made by others for services of the same nature and quality and based upon the level and quality of business management services provided by Brown Advisory to the other Funds in the Trust.
It was noted that in making their determinations, the Trustees had considered and relied upon the materials provided to them at the Board meeting with respect to the proposed contract and the presentation of the representatives of Brown Advisory. In reaching their conclusion with respect to the approval of the adoption of the Investment Advisory Agreement and the level of fees to be paid under the Agreement, the Trustees did not identify any one single factor as being controlling, rather, the Trustees took note of a combination of factors that had influenced their decision making process. They noted the level and quality of investment advisory services provided by Brown Advisory to each of the other Funds in the Trust, and they found that these services will benefit the Fund and its shareholders and also reflected management’s overall commitment to the growth and development of the Fund.
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Information About Proxy Voting (Unaudited)
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling toll-free at (800) 540-6807 and by accessing the Funds’ website at www.brownadvisoryfunds.com. Furthermore, you can obtain the description on the SEC’s website at www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the 12-month period ended June 30 is available without charge, by calling toll-free at (800) 540-6807. In addition, you can obtain the Funds’ proxy voting records on the SEC’s website at www.sec.gov.
Information About the Portfolio Holdings (Unaudited)
The Funds file their complete schedule of portfolio holdings for their first and third fiscal quarters with the SEC on Form N-Q. The Funds’ Form N-Q is available without charge, upon request, by calling toll-free at (800) 540-6807. Furthermore, you can obtain the Form N-Q on the SEC’s website at www.sec.gov. The Funds’ schedules of portfolio holdings are posted on their website at www.brownadvisoryfunds.com within ten business days after calendar quarter end.
Householding (Unaudited)
In an effort to decrease costs, the Funds will reduce the number of duplicate Prospectuses and annual and semi-annual reports that you receive by sending only one copy of each to those addresses shown by two or more accounts. Please call the Transfer Agent toll free at (800) 540-6807 to request individual copies of these documents. The Funds will begin sending individual copies 30 days after receiving your request. This policy does not apply to account statements.
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BROWN ADVISORY FUNDS
At Brown Advisory, 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 | — | — | 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 | — | — | 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 | — | — | BASBX | 115233447 | — | — | |||||
Maryland Bond Fund | — | — | BIAMX | 115233751 | — | — | |||||
Tax Exempt Bond Fund | — | — | BIAEX | 115233108 | — | — | |||||
Mortgage Securities Fund | BAFZX | 115233546 | BIAZX | 115233587 | — | — | |||||
WMC Strategic European Equity Fund | BAFHX | 115233629 | BIAHX | 115233611 | BAHAX | 115233595 | |||||
WMC Japan Alpha Opportunities Fund | BAFJX | 115233579 | BIAJX | 115233561 | BAJAX | 115233553 | |||||
Somerset Emerging Markets Fund | BAFQX | 115233652 | BIAQX | 115233645 | BAQAX | 115233637 | |||||
Macquarie Asia New Stars Fund | BAFNX | 115233512 | BIANX | 115233496 | — | — |
This report is submitted for the general information of the shareholders of each Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus, which includes information regarding the Funds’ risks, objectives, fees and expenses, experience of their management, and other information.
BX-SEMIANNUAL
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
(a) | Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934). |
(b) | Not applicable. |
Item 6. Schedule of 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 has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Incorporated by reference to previous Form N-CSR filing. |
(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.
(b) | Certification pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Brown Advisory Funds
By (Signature and Title)* /s/David M. Churchill
David M. Churchill, Principal Executive Officer
Date March 6, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/David M. Churchill
David M. Churchill, Principal Executive Officer
Date March 6, 2018
By (Signature and Title)* /s/Jason T. Meix
Jason T. Meix, Principal Financial Officer
Date March 6, 2018
* Print the name and title of each signing officer under his or her signature.