Principal Investment Strategies

 

Under normal circumstances, the Fund aims to achieve its investment objective by investing at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities.  The Fund also will, under normal market conditions: (1) invest at least 40% of its assets outside the United States, or if market conditions are not favorable, at least 30% of its assets outside the United States, and (2) hold securities of issuers located in at least three countries.   The Fund’s non-U.S. investments may include equity securities issued by companies that are established or operating in emerging market countries.

 

The equity securities in which the Fund may invest will include the equity securities of companies that Brown Advisory Limited (the “Sub-Adviser”) believes are leaders within their industry or country as demonstrated by an ability to deliver high relative return on invested capital over time.  This typically can be attributable to, among other things, a strong competitive position and a defendable barrier to entry.  The equity securities in which the Fund may invest include common stock, preferred stock, equity-equivalent securities, such as stock futures contracts, equity options, other investment companies, American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), and exchange traded funds (“ETFs”).  The equity securities in which the Fund may invest will generally be issued by mid- and large-capitalization companies. Medium and large market capitalization companies are, according to the Sub-Adviser, those companies with market capitalizations generally greater than $2 billion at the time of purchase.  In addition to those securities, the Fund may also invest in convertible bonds, Rule 144A securities, US treasury bills, fixed and/or floating rate US government securities, real estate investment trusts and unlisted securities.

 

The Fund may sell its portfolio securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.

 

In order to respond to adverse market, economic, political, or other conditions, the Fund may assume a temporary defensive position that is inconsistent with its investment objective and principal investment strategy and invest without limit in cash and prime quality cash equivalents such as prime commercial paper and other money market instruments.  A defensive position, taken at the wrong time, may have an adverse impact on the Fund’s performance.  The Fund may be unable to achieve its investment objective during the employment of a temporary defensive measure.

Principal Investment Strategies

 

Under normal circumstances, the Fund aims to achieve its investment objective by investing at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities.  The Fund also will, under normal market conditions: (1) invest at least 40% of its assets outside the United States, or if market conditions are not favorable, at least 30% of its assets outside the United States, and (2) hold securities of issuers located in at least three countries. The Fund’s non-U.S. investments may include equity securities issued by companies that are established or operating in emerging market countries.  The Fund considers a company to be established or operating in emerging market countries if: (i) it is organized under the laws of or maintains its principal office in an emerging market country; (ii) its securities are principally traded on trading markets in emerging markets countries; (iii) it derives at least 50% of its total revenue or profits from either goods or services produced or sales made in emerging markets countries; or (iv) it has at least 50% of its assets in emerging market countries.

 

The equity securities in which the Fund may invest will include the equity securities of companies that Brown Advisory Limited (the “Sub-Adviser”) believes are leaders within their industry or country as demonstrated by an ability to deliver high relative return on invested capital over time.  This typically can be attributable to, among other things, a strong competitive position and a defendable barrier to entry.  The equity securities in which the Fund may invest include common stock, preferred stock, equity-equivalent securities, such as stock futures contracts, equity options, other investment companies, American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), and exchange traded funds (“ETFs”).  The equity securities in which the Fund may invest will generally be issued by mid- and large-capitalization companies. Medium and large market capitalization companies are, according to the Sub-Adviser, those companies with market capitalizations generally greater than $2 billion at the time of purchase. In addition to those securities, the Fund may also invest in convertible bonds, Rule 144A securities, US treasury bills, fixed and/or floating rate US government securities, real estate investment trusts and unlisted securities.

 

The Sub-Adviser’s Process — Purchasing Portfolio Securities.

The Sub-Adviser will use in-house research and other sources to identify a universe of companies across a broad range of industries and countries whose underlying fundamentals are considered by the Sub-Adviser to be attractive. The Sub-Adviser will focus on companies that it believes exhibit the following desirable characteristics:

 

• High-quality businesses exhibiting favorable economics supported by enduring competitive advantages that can deliver excess economic return over time;

• Capable and trustworthy management with a long-term orientation to managing their business;

• Sustainable, predictable, premium growth in cash flow over time;

• Positive industry dynamics;

• Sensible capital allocation; and

• Have a reasonable price - the Sub-Adviser expects growth to compound the excess economic return over time.

 

The Sub-Adviser believes that investing in the best companies globally in any sector or country can deliver superior long-term investment returns. The Sub-Adviser seeks to identify high-quality companies underpinned by structural long-term growth and strong management teams, and to purchase those companies at reasonable prices.

 

Investment opportunities will reflect broad themes that touch on structural change and represent business models with desirable characteristics such as sustainable barriers to entry, enjoy a dominant market position, exhibit a certain level of predictability, enhance customer outcomes, have pricing power and benefit from secular growth. Management teams also must be high quality, manage for the long term and have a demonstrated record of acting in the best interest of shareholders. The Sub-Adviser emphasizes individual security selection based on identifying long-term attractive businesses (i.e., those with significant desirable characteristics, such as a viable, long-term franchise, sustainable business model, generate excess economic return, high return on invested capital and stable profitability) and few or no undesirable characteristics (such as excessive financial or operational leverage, risk of business or product obsolescence, excessive compensation, misaligned incentives or management hubris), when they are available at reasonable prices.

 

The Sub-Adviser’s Process — Selling Portfolio Securities .

The Sub-Adviser will monitor the companies in the Fund’s portfolio to determine if there have been any fundamental changes in the companies. The Sub-Adviser may sell a security or reduce its position in a security if:

• The security’s market price exceeds the Sub-Adviser’s estimate of intrinsic value;

• The ratio of risk and reward of continuing to own the company’s equity is no longer attractive; or

• The Sub-Adviser needs to raise cash to purchase a more attractive investment opportunity, satisfy net redemptions, or other purposes.

 

Temporary Defensive Position

In order to respond to adverse market, economic, political, or other conditions, the Fund may assume a temporary defensive position that is inconsistent with its investment objective and its principal investment strategy and invest without limit in cash and prime quality cash equivalents such as prime commercial paper and other money market instruments. A defensive position, taken at the wrong time, may have an adverse impact on the Fund’s performance. The Fund may be unable to achieve its investment objective during the employment of a temporary defensive measure.

 

Who May Want to Invest in the Fund

The Fund may be appropriate for you if you:

·	Are willing to tolerate significant changes in the value of your investment;

·	Are pursuing a long-term investment goal; or

·	Are willing to accept risk of market value fluctuation in the short-term.

 

 

The Fund may not be appropriate for you if you:

·	Need regular income or stability of principal;

·	Are pursuing a short-term investment goal or investing emergency reserves; or

·	Cannot tolerate fluctuation in the value of your investments.

 

 

Additional Info rm ation about the Fund’s Principal Investment Strategies

   

Table of Inv e stment Terms

 

Set forth below are terms specific to certain of the Fund’s principal investments.  These terms are further explained on the following pages.

 

	Brown Advisory Global Leaders Fund
Equity Security (1)	ü
Convertible Security (2)	ü
Currency Transactions (3)	ü
ADRs and GDRs (4)	ü
REITs (5)	ü
ETFs (6)	ü
Market Capitalization (7)	ü
Company Fundamentals (8)	ü
Price/Earnings Ratio (9)	ü
Price/Sales Ratio (10)	ü
Price/Cash Flow Ratio (11)	ü
Emerging or Developing Markets (12)	ü
Derivatives (13)	ü
U.S. Government Security (14)	ü

 

(1)	Equity Security means an equity or ownership interest in a company including common and preferred stock, warrants and securities convertible into common and preferred stock, listed ADRs, GDRs, REITs and private placements in these types of securities.

 

(2)

Convertible Securities are bonds, debentures, notes, preferred stock, rights, warrants or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or cash within a particular period of time at a specified price or formula.

 

(3)	Currency transactions include the purchase and sale of currencies to facilitate securities transactions and forward currency contracts, which are used to hedge against changes in currency exchanges rates.

 

(4)	ADRs and GDRs typically are issued by a U.S. bank or trust company and evidence ownership of underlying securities issued by a foreign company, and are designed for use in U.S. securities markets.

 

(5)	REITs are companies that pool investor funds to invest primarily in income producing real estate or real estate related loans or interests.

 

(6)	ETFs are types of mutual funds that trade like stocks on an exchange. ETFs are usually constructed to track an index, a commodity, or a basket of assets like an index fund.

 

(7)	Market Capitalization means the value of a company’s common stock in the stock market.

 

(8)	Company Fundamentals means factors reflective of a company’s financial condition including balance sheets and income statements, asset history, earnings history, product or service development and management productivity.

 

(9)	Price/Earnings Ratio means the price of a stock divided by the company’s earnings per share.

 

(10)	Price/Sales Ratio means the amount an investor is willing to pay for a dollar of revenue.

 

(11)	Price/Cash Flow Ratio means the price of a stock divided by free cash flow per share.

 

(12)

Emerging or Developing Markets means generally countries other than Canada, the United States or those countries included in the Morgan Stanley Capital International EAFE Index (“MSCI EAFE”). As of December 31, 2014, the countries included in the MSCI EAFE Index are Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

 

(13)

Derivatives are financial contracts, the value of which depends on, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes.  Examples of derivative instruments include options contracts, futures contracts, options on futures contracts, participatory notes and swap agreements (including, but not limited to, credit default swaps).  The Fund typically will use derivatives as a substitute for taking a position in the underlying asset or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk or currency risk.  The Sub-Adviser may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by the Fund will succeed.

 

(14)	U.S. Government Security means a fixed income security issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

 

 

 

An investment in the Fund is subject to one or more of the principal risks identified in the following table.  The identified principal risks are discussed in more detail in the disclosure that immediately follows the table.

 

 

As with all mutual funds, there is the risk that you could lose all or a portion of your investment in the Fund.  An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.  There is no assurance that the Fund will achieve its investment objective, and an investment in the Fund is not by itself a complete or balanced investment program.  The following provides additional information regarding the principal risks that could affect the value of your investment:

 

American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”) Risk  

ADRs and GDRs may be subject to some of the same risks as direct investment in foreign companies, which includes international trade, currency, political, regulatory and diplomatic risks. In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay some or all of the depositary’s transaction fees.  Under an unsponsored ADR arrangement, the foreign issuer assumes no obligations and the depositary’s transaction fees are paid directly by the ADR holders.  Because unsponsored ADR arrangements are organized independently and without the cooperation of the issuer of the underlying securities, available information concerning the foreign issuer may not be as current as for sponsored ADRs and voting rights with respect to the deposited securities are not passed through.  GDRs can involve currency risk, since unlike ADRs, they may not be U.S. dollar-denominated.

 

A convertible security is a bond, debenture, note, preferred stock, right, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or cash within a particular period of time at a specified price or formula.  A convertible security generally entitles the holder to receive interest paid or accrued on debt securities or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged.  Before conversion, convertible securities generally have characteristics similar to both debt and equity securities.  Convertible securities ordinarily provide a stream of income with generally higher yields than those of common stock of the same or similar issuers.  Convertible securities generally rank senior to common stock in a corporation’s capital structure but are usually subordinated to comparable nonconvertible proportionate securities.

 

Convertible securities generally do not participate directly in any dividend increases or decreases of the underlying securities although the market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities.  The Fund’s investments in convertible securities may subject the Fund to the risks that prevailing interest rates, issuer credit quality and any call provisions may affect the value of the Fund’s convertible securities.  Rights and warrants entitle the holder to buy equity securities at a specific price for a specific period of time.  Rights typically have a substantially shorter term than do warrants.  Rights and warrants may be considered more speculative and less liquid than certain other types of investments in that they do not entitle a holder to dividends or voting rights with respect to the underlying securities nor do they represent any rights in the assets of the issuing company.  Rights and warrants may lack a secondary market.

 

Currency and Exchange Rate Risk

The Fund uses various strategies to attempt to minimize the impact of changes in the value of a currency against the U.S. dollar.  These strategies may not always be successful.  In order to minimize transaction costs, or for other reasons, the Fund’s exposure to a foreign currency may not be fully hedged at all times.  Currency exchange rates can be very volatile and can change quickly and unpredictably for a number of reasons, including changes in interest rates and the imposition of currency controls or other political, economic and tax developments in the U.S. or abroad.  Therefore, the value of an investment in the Fund may also go up or down quickly and unpredictably in response to these events and investors may lose money as a result.

 

Derivatives Risk

Derivatives are financial instruments that have a value which depends upon, or derived from, a reference asset, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies.  Derivatives may result in investment exposures that are greater than their cost would suggest; in other words, a small investment in a derivative may have a large impact on the Fund’s performance.  The successful use of derivatives generally depends on the manager’s ability to predict market movements.

 

The Fund may use derivatives in various ways.  The Fund may use derivatives as a substitute for taking a position in the reference asset or to gain exposure to certain asset classes; under such circumstances, the derivatives may have economic characteristics similar to those of the reference asset, and the Fund’s investment in the derivatives may be applied toward meeting a requirement to invest a certain percentage of its net assets in instruments with such characteristics.  The Fund may use derivatives to hedge (or reduce) its exposure to a portfolio asset or risk.  The Fund may use derivatives for leverage.  The Fund may also use derivatives to manage cash.

 

 

Hedging Risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they also may offset gains.

 

Correlation Risk is the risk that derivative instruments may be mispriced or improperly valued and that changes in the value of the derivatives may not correlate perfectly with the underlying asset or security.

 

Volatility Risk is the risk that, because the Fund may use some derivatives that involve economic leverage, this economic leverage will increase the volatility of the derivative instruments as they may increase or decrease in value more quickly than the underlying currency, security, interest rate or other economic variable.

 

Credit Derivatives Risk is the risk associated with the use of derivatives, which is a highly specialized activity that involves strategies and risks different from those with ordinary portfolio security transactions.  If the Sub-Adviser is incorrect in its forecast of default risks, market spreads or other applicable factors, the Fund’s investment performance would diminish compared with what it would have been if these techniques were not used.  Moreover, even if the Sub-Adviser is correct in its forecast, there is a risk that a credit derivative position may correlate imperfectly with the price of the asset or liability being hedged.  The Fund’s risk of loss in a credit derivative transaction varies with the form of the transaction.

 

Segregation Risk is the risk associated with any requirement, which may be imposed on the Fund, to segregate assets or enter into offsetting positions in connection with investments in derivatives.  Such segregation will not limit the Fund’s exposure to loss, and the Fund may incur investment risk with respect to the segregated assets to the extent that, but for the applicable segregation requirement, the Fund would sell the segregated assets.

 

Equity and General Market Risk

The Fund’s investments in equity securities may subject the Fund to volatility and the following risks:

 

·

prices of stock may fall over short or extended periods of time;

·

cyclical movements of the equity market may cause the value of the Fund’s securities to fluctuate drastically from day to day; and

·

individual companies may report poor results or be negatively affected by industry and or economic trends and developments.

 

In general, stock values are affected by activities specific to the company as well as general market, economic and political conditions.  The net asset value (“NAV”) of the Fund and investment return will fluctuate based upon changes in the value of its portfolio securities.  The market value of securities in which the Fund invests is based upon the market’s perception of value and is not necessarily an objective measure of the securities’ value.  Other general market risks include:

 

·

the market may not recognize what the Sub-Adviser believes to be the true value or growth potential of the stocks held by the Fund;

·

the earnings of the companies in which the Fund invests will not continue to grow at expected rates, thus causing the price of the underlying stocks to decline;

·

the smaller a company’s market capitalization, the greater the potential for price fluctuations and volatility of its stock due to lower trading volume for the stock, less publicly available information about the company and less liquidity in the market for the stock.  The potential for price fluctuations in the stock of a medium capitalization company may be greater than that of a large capitalization company;

·

the Sub-Adviser’s judgment as to the growth potential or value of a stock may prove to be wrong; and

·

a decline in investor demand for the stocks held by the Fund also may adversely affect the value of the securities.

 

ETF Risk

Investments in ETFs (which may, in turn, invest in equities, bonds, and other financial vehicles ) may involve duplication of certain fees and expenses.  By investing in an ETF, the Fund becomes a shareholder of that ETF.  As a result, Fund shareholders indirectly bear their proportionate share of the ETF’s fees and expenses which are paid by the Fund as a shareholder of the ETF.  These fees and expenses are in addition to the fees and expenses that Fund shareholders directly bear in connection with the Fund’s own operations.  If the ETF fails to achieve its investment objective, the Fund’s investment in the ETF may adversely affect the Fund’s performance.  Investing in an ETF subjects the Fund to these risks affecting the ETF, including the possibility that the value of the underlying securities held by the ETF could decrease. In addition, because ETFs are listed on national stock exchanges and are traded like stocks listed on an exchange, (1) the Fund may acquire ETF shares at a discount or premium to their NAV and (2) ETFs are subject to brokerage and other trading costs, which could result in greater expenses to the Fund.  Finally, because the value of ETF shares depends on the demand in the market, the Sub-Adviser may not be able to liquidate the Fund’s holdings at the most optimal time, adversely affecting the Fund’s performance.

 

Foreign Securities/Emerging Market Risk

If the Fund invests in foreign securities and ADRs/GDRs, an investment in that Fund may have the following additional risks:

·

foreign securities may be subject to greater fluctuations in price than securities of U.S. companies because foreign markets may be smaller and less liquid than U.S. markets;

·

changes in foreign tax laws, exchange controls, investment regulations and policies on nationalization and expropriation as well as political instability may affect the operations of foreign companies and the value of their securities;

·

fluctuations in currency exchange rates and currency transfer restitution may adversely affect the value of the Fund’s investments in foreign securities, which are denominated or quoted in currencies other than the U.S. dollar;

·

foreign securities and their issuers are not subject to the same degree of regulation as U.S. issuers regarding information disclosure, insider trading and market manipulation.  There may be less publicly available information on foreign companies and foreign companies may not be subject to uniform accounting, auditing, and financial standards as are U.S. companies;

·

foreign securities registration, custody and settlements may be subject to delays or other operational and administrative problems;

 

·

certain foreign brokerage commissions and custody fees may be higher than those in the United States;

·

dividends payable on the foreign securities contained in the Fund’s portfolio may be subject to foreign withholding taxes, thus reducing the income available for distribution to the Fund’s shareholders; and

·

prices for stock or ADRs/GDRs, may fall over short or extended periods of time.

 

If the Fund invests in emerging markets, an investment in that Fund may have the following additional risks:

·

information about the companies in emerging markets is not always readily available;

·

stocks of companies traded in emerging markets may be less liquid and the prices of these stocks may be more volatile than the prices of the stocks in more established markets;

·

greater political and economic uncertainties exist in emerging markets than in developed foreign markets;

·

the securities markets and legal systems in emerging markets may not be well developed and may not provide the protections and advantages of the markets and systems available in more developed countries;

·

very high inflation rates may exist in emerging markets and could negatively impact a country’s economy and securities markets;

·

emerging markets may impose restrictions on the Fund’s ability to repatriate investment income or capital and thus, may adversely affect the operations of the Fund;

·

certain emerging markets impose constraints on currency exchange and some currencies in emerging markets may have been devalued significantly against the U.S. dollar;

·

governments of some emerging markets exercise substantial influence over the private sector and may own or control many companies.  As such, governmental actions could have a significant effect on economic conditions in emerging markets, which, in turn, could affect the value of the Fund’s investments; and

·

emerging markets may be subject to less government supervision and regulation of business and industry practices, stock exchanges, brokers and listed companies.

 

ADR and GDR investments may subject the Fund to the same risks as direct investments in foreign companies.

 

For these and other reasons, the prices of securities in emerging markets can fluctuate more significantly than the prices of securities of companies in developed countries.  The less developed the country, the greater affect these risks may have on your investment in the Fund, and as a result, an investment in that Fund may exhibit a higher degree of volatility than either the general domestic securities market or the securities markets of developed foreign countries.

 

Growth Company Risk

An investment in growth stocks may be susceptible to rapid price swings, especially during periods of economic uncertainty.  Growth stocks typically have little or no dividend income to cushion the effect of adverse market conditions and may be particularly volatile in the event of earnings disappointments or other financial difficulties experienced by the issuer.

 

Investments in Other Investment Companies Risk

Investments in other investment companies, including money market funds, may involve duplication of certain fees and expenses. By investing in other investment companies, the Fund becomes a shareholder of that company. As a result, Fund shareholders indirectly bear their proportionate share of the other investment company’s fees and expenses which are paid by the Fund as a shareholder of the other investment company. These fees and expenses are in addition to the fees and expenses that Fund shareholders directly bear in connection with the Fund’s own operations. If the other investment company fails to achieve its investment objective, the Fund’s investment in the other investment company may adversely affect the Fund’s performance.

 

Liquidity Risk

Certain fixed income securities held by the Fund may be difficult (or impossible) to sell at the time and at the price the Sub-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.  There is the possibility that the Fund may lose money or be prevented from realizing capital gains if it cannot sell a security at a particular time and price.

 

Management Risk

The Fund is actively managed and its performance may reflect the Sub-Adviser’s ability to make decisions which are suited to achieving the Fund’s investment objectives.  Due to its active management, the Fund could under perform other mutual funds with similar investment objectives.

 

Medium Capitalization Company Risk

Medium Capitalization company stocks may have greater fluctuations in price than the stocks of large companies.  Further, stocks of mid-sized companies could be more difficult to liquidate during market downturns compared to larger, more widely traded companies.  Medium Capitalization companies may have limited product lines or resources and may be dependent upon a particular market niche.

 

New Fund Risk

There can be no assurance that a newly organized Fund will grow to or maintain an economically viable size, in which case the Board may determine to liquidate the Fund.  Liquidation can be initiated without shareholder approval by the Board if it determines it is in the best interest of shareholders.  As a result, the timing of any liquidation may not be favorable to certain individual shareholders.

 

Portfolio Turnover Risk

Frequent trading increases the Fund’s portfolio turnover rate and may increase transaction costs, such as brokerage commissions, dealer mark-ups and taxes.  Increased transaction costs could detract from the Fund’s performance. Higher portfolio turnover also may result in higher taxes when Fund shares are held in a taxable account.

 

Private Placement Risk

The Fund may invest in privately issued securities of domestic common and preferred stock, convertible debt securities, ADRs, REITs and ETFs, including those which may be resold only in accordance with Rule 144A under the 1933 Act.  Privately issued securities are restricted securities that are not publicly traded.  Accordingly, the liquidity of the market for specific privately issued securities may vary.  Delay or difficulty in selling such securities may result in a loss to the Fund.  Privately issued securities that are determined by the Sub-Adviser to be “illiquid” are subject to the Fund’s policy of not investing more than 15% of its net assets in illiquid securities.

 

REIT and Real Estate Risk

The Fund’s investments in REITs may subject the Fund to the following additional risks:

·

declines in the value of real estate;

 

·

changes in interest rates;

·

lack of available mortgage funds or other limits on obtaining capital;

·

overbuilding;

·

extended vacancies of properties;

·

increases in property taxes and operating expenses;

·

changes in zoning laws and regulations;

·

casualty or condemnation losses; and

·

tax consequences of the failure of a REIT to comply with tax law requirements.

 

The Fund will bear a proportionate share of the REIT’s on-going operating fees and expenses, which may include management, operating and administrative expenses in addition to the expenses of the Fund.

 

U.S. Government Securities Risk

Although the Fund’s U.S. Government securities are considered to be among the safest investments, they are not guaranteed against price movements due to changing interest rates. Some obligations issued or guaranteed by U.S. Government agencies and instrumentalities, including, for example, Ginnie Mae pass-through certificates, are supported by the full faith and credit of the U.S. Treasury. Other obligations issued by or guaranteed by federal agencies, such as those securities issued by Fannie Mae, are supported by the discretionary authority of the U.S. Government to purchase certain obligations of the federal agency, while other obligations issued by or guaranteed by federal agencies, such as those of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury.

 

While the U.S. Government provides financial support to such U.S. Government-sponsored federal agencies, no assurance can be given that the U.S. Government will always do so, since the U.S. Government is not so obligated by law.

 

Valuation Risk

The prices provided by the Fund’s pricing services or independent dealers or the fair value determinations made by the valuation committee of the Sub-Adviser may be different from the prices used by other mutual funds or from the prices at which securities are actually bought and sold.  The prices of certain securities provided by pricing services may be subject to frequent and significant change, and will vary depending on the information that is available.

 

Value Company Risk

Value investing carries the risk that the market will not recognize a security’s intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced.  The determination that a stock is undervalued is subjective; the market may not agree, and a stock’s price may not rise to what the investment manager believes is its full value.  If the market does not consider the stock to be undervalued then the value of the Fund’s shares may decline, even if stock prices generally are rising.

 

The Fund is a series of Brown Advisory Funds (the “Trust”).  The business of the Trust and the Fund is managed under the oversight of the Board of Trustees (the “Board”).  The Board meets periodically to review the Fund’s performance, monitor investment activities and practices, and discuss other matters affecting the Fund.  Additional information regarding the Board, as well as the Trust’s executive officers, may be found in the Fund’s Statement of Additional Information (“SAI”).

 

The Adv is er

 

Brown Advisory LLC .   The Fund’s Adviser is Brown Advisory LLC, 901 South Bond Street, Suite 400, Baltimore, Maryland 21231.  The Adviser does business under the name of Brown Advisory.  The Adviser is a wholly-owned subsidiary of Brown Advisory Management, LLC, a Maryland limited liability company.  Brown Advisory Management, LLC is controlled by Brown Advisory Incorporated, a holding company incorporated under the laws of Maryland in 1998.  The Adviser and its affiliates (“Brown Advisory”) have provided investment advisory and management services to clients for over 10 years. As of March 31, 2015, Brown Advisory had approximately $52 billion in assets under management and advisement, including both discretionary and non-discretionary accounts.

 

The Adviser receives an advisory fee from the Fund at an annual rate of the Fund’s average daily net assets as indicated below. The annual advisory fee for the Fund is as follows:

 

	Annual Advisory Fee
Brown Advisory Global Leaders Fund	0.65%

 

The Fund had not commenced operations prior to the date of this prospectus.

 

A discussion summarizing the basis on which the Board approved the Investment Advisory Agreement between the Adviser and the Trust, on behalf of the Fund, and the Investment Sub-Advisory Agreement between the Adviser and the Sub-Adviser will be presented in the Fund’s Annual Report to Shareholders dated June 30, 2015.

 

The Adviser also provides certain business management services to the Fund pursuant to a separate Business Management Agreement.  Pursuant to the Business Management Agreement, the Adviser supervises all aspects of the management and operations of the Fund, which includes monitoring the Fund’s relationships with third-party service providers to the Fund and other related business management services.  For these services, the Fund pays the Adviser a fee of 0.05% of its average daily net assets.

 

The Trust and Adviser have applied to the Securities and Exchange Commission (“SEC”) for an exemptive order (the “Exemptive Order”) that would permit the Brown Advisory Funds and the Adviser, subject to certain conditions and approval by the Board of Trustees, but without shareholder approval, to hire sub-advisers for the Brown Advisory Funds, change the terms of particular agreements with sub-advisers or continue the employment of existing sub-advisers after events that would otherwise cause an automatic termination of a sub-advisory agreement (“Manager of Managers Arrangement”).  Within 90 days of retaining a new sub-adviser, shareholders of any affected Fund will receive written notification of the change.  The Fund’s sole shareholder has approved the Manager of Managers Arrangement. However, as of the date of this Prospectus, the Trust and Adviser have not yet received the Exemptive Order.

The Sub-Ad vis er

 

Brown Advisory Limited. The Brown Advisory Global Leaders Fund’s sub-adviser is Brown Advisory Limited, 6-10 Bruton Street, Third Floor, London, W1J6PX, United Kingdom.  Brown Advisory Limited is an affiliate of the Adviser based in London.

 

Subject to the general oversight of the Board and the Adviser, the Sub-Adviser is directly responsible for making the investment decisions for the Fund.

 

Portfolio Man ag er

 

Brown Advisory Global Leaders Fund. Mr. Michael Dillon, CFA, is responsible for the day-to-day management of the Fund’s portfolio.

 

Michael Dillon has been the portfolio manager of the Fund since its inception in 2015. Mr. Dillon, CFA, is a portfolio manager with Brown Advisory Limited. He formerly worked at HSBC Global Asset Management in Hong Kong where he was the Co-Head of Asian Equities. Mr. Dillon, a Chartered Financial Analyst (CFA), is originally from Australia and graduated from the University of Melbourne where he was awarded three Bachelor degrees in six years.

 

The Fund’s SAI provides additional information about the Portfolio Manager’s compensation, other accounts managed by the Portfolio Manager and the Portfolio Manager’s ownership of shares in the Fund.

 

Other Service Prov id ers

 

U.S. Bancorp Fund Services, LLC (the “Transfer Agent”) provides certain administration, fund accounting and transfer agency services to the Fund.

 

Quasar Distributors, LLC (the “Distributor”) serves as the Fund’s distributor and principal underwriter in connection with the offering of the Fund’s shares.  The Distributor may enter into arrangements with banks, broker-dealers and other financial institutions through which investors may purchase or redeem Fund shares.  The Distributor is an affiliate of the Transfer Agent.

 

U.S. Bank N.A. serves as custodian to the Fund.  The Transfer Agent, the Distributor and U.S. Bank N.A. are affiliates.