485APOS 1 baf_485a.htm POST EFFECTIVE AMENDMENT baf_485a.htm

 
Filed with the Securities and Exchange Commission on August 15, 2014

1933 Act Registration File No. 333-181202
1940 Act File No. 811-22708

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM N-1A
 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
   
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Post-Effective Amendment No.
21
 
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X
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and/or
 
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[
X
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Amendment No.
23
 
[
X
]
 
(Check appropriate box or boxes.)

BROWN ADVISORY FUNDS
(Exact Name of Registrant as Specified in Charter)
 
901 South Bond Street, Suite 400
Baltimore, Maryland 21231
(Address of Principal Executive Offices, including Zip Code)
 
Registrant’s Telephone Number, including Area Code:  (410) 537-5400
 
David M. Churchill, President and Principal Executive Officer
Brown Advisory Funds
901 South Bond Street, Suite 400
Baltimore, Maryland 21231
(Name and Address of Agent for Service)
 
Copy to:
Patrick W.D. Turley, Esq.
Dechert LLP
1900 K Street, NW
Washington, DC 20006

It is proposed that this filing will become effective (check appropriate box)

[
 
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immediately upon filing pursuant to paragraph (b)
[
 
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on (date) pursuant to paragraph (b)
[
 
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60 days after filing pursuant to paragraph (a)(1)
[
 
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on (date) pursuant to paragraph (a)(1)
[
 
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75 days after filing pursuant to paragraph (a)(2)
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X
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on October 31, 2014 pursuant to paragraph (a)(2) of Rule 485.
 
If appropriate, check the following box:

[
 
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This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
 
 
 
 
 

 
 
Subject to Completion—Dated August 15, 2014
 
 
The information in this Prospectus is not complete and may be changed.  We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 

Prospectus
October 31, 2014
client logo
 

 
BROWN ADVISORY TOTAL RETURN FUND
Institutional Shares (BXXXX)
Investor Shares (BXXXX)
Advisor Shares (BXXXX)
 
BROWN ADVISORY STRATEGIC BOND FUND
(formerly, Brown Advisory Tactical Bond Fund)
Institutional Shares (Not Available for Sale)
Investor Shares (Not Available for Sale)
Advisor Shares (BATBX)
 
 




The Securities and Exchange Commission has not approved or disapproved any Fund’s shares or determined whether this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
 
 
 

 
 

Summary Section
This important section summarizes the Funds’ objectives, strategies, fees, risks, past performance, portfolio turnover, portfolio manager, your account and other information.
 
Additional Information About the Fund's Principal Investment Strategies
This section provides details about the Funds’ investment strategies.
 
Table of Investment Terms
 
Principal Investment Risks
This section provides details about the Funds’ principal investment risks.
 
Management
Review this section for information about Brown Advisory, LLC (the “Adviser”), and the people who manage the Funds.
 
Choosing a Share Class
This section explains the differences between each class of shares and the applicable fees and sales charges.
 
Your Account
This section explains how shares are valued and how you can purchase and sell Fund Shares.
 
Distributions and Taxes
This section provides details about dividends, distributions and taxes.
 
Financial Highlights
Review this section for details on selected financial statements of the Fund.
   
3
  Brown Advisory Total Return Fund    3
  Brown Advisory Strategic Bond Fund (formerly, Brown Advisory Tactical Bond Fund)   8
       
   
14
  Brown Advisory Total Return Fund    14
  Brown Advisory Strategic Bond Fund    16
       
   
18
       
   
20
       
   
26
   
26
   
27
   
27
 
Fund Expenses                          
 
27
       
  Choosing a Share Class   29
  Class Comparison    29
  Rule 12b-1 Distribution Fees    30
  Shareholder Service Fees   30
  Additional Payments to Dealers   31
       
  Your Account   32
  How to Contact the Funds   32
  General Information   32
  How to Buy Shares    35
  How to Sell Shares    39
  Exchange Privileges    42
  Account and Transaction Policies   43
       
  Distributions and Taxes    48
  Distributions   48
  Taxes   48
       
  Financial Highlights   50
 

 
Brown Advisory Total Return Fund
 
 
  client logo

 
Institutional Shares ([XXXXX])
Investor Shares ([XXXXX])
Advisor Shares ([XXXXX])
 
Investment Objective
 
The Brown Advisory Total Return Fund (the “Fund”) seeks to provide a high level of current income consistent with preservation of principal.
 
Fees and Expenses
 
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
 
Shareholder Fees
(fees paid directly from your investment)
 
Institutional
Shares
 
Investor
Shares
 
Advisor
Shares
Maximum Sales Charge (Load) imposed on Purchases (as a % of the offering price)
 
None
 
None
 
None
Maximum Deferred Sales Charge (Load) imposed on Redemptions (as a % of the sale price)
 
None
 
None
 
None
Redemption Fee (as a % of amount redeemed on shares held for 14 days or less)
 
1.00%
 
1.00%
 
1.00%
Exchange Fee (as a % of amount exchanged on shares held for 14 days or less)
 
1.00%
 
1.00%
 
1.00%
             
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
       
Management Fees
 
0.30%
 
0.30%
 
0.30%
Distribution (12b-1) Fees
 
None
 
None
 
0.25%
Shareholder Servicing Fees
 
None
 
0.05%
 
0.05%
Other Expenses(1)
 
0.20%
 
0.20%
 
0.20%
Acquired Fund Fees and Expenses(2)
 
0.01%
 
0.01%
 
0.01%
Total Annual Fund Operating Expenses
 
0.51%
 
0.56%
 
0.81%
Fee Waiver and/or Expense Reimbursement
 
[       ]%
 
[       ]%
 
[      ]%
Total Annual Fund Operating Expenses After Fee Waiver(3)
 
[       ]%
 
[       ]%
 
[      ]%
 
(1)
“Other Expenses” are based on estimated amounts for the current fiscal year.
(2)
Acquired Fund Fees and Expenses are indirect fees and expenses that a Fund incurs from investing in the shares of other mutual funds, including money market funds and exchange traded funds.  The Acquired Fund Fees and Expenses are estimated for the current fiscal year.
(3)
The Adviser has contractually agreed to waive all or any portion of the management fee that would otherwise be paid by the Fund to the Adviser in an amount equal to the separate management fee indirectly paid by the Fund to the Brown Advisory Mortgage Securities Fund, another fund managed and advised by the Adviser that may be invested in by the Fund.  The contractual waiver may be changed or eliminated at any time by the Board of Trustees, on behalf of the Fund, upon 60 days written notice to the Adviser.  The contractual waiver may not be terminated by the Adviser without the consent of the Board of Trustees.

Example
 
The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.  This example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of each period.  The example also assumes that your investment has a 5% annual return each year and that the Fund’s operating expenses remain the same.  Although your actual costs may be higher or lower, based on these assumptions your costs would be:
 
 
 
 
Brown Advisory Total Return Fund
 
 
  client logo


 
 
1 Year
3 Years
Institutional Shares
$
$
Investor Shares
$
$
Advisor Shares
$
$
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance.  Because the Fund commenced operations on October 31, 2014, there is no annual portfolio turnover information included.
 
Principal Investment Strategies
 
Under normal conditions, Brown Advisory, LLC (the “Adviser”) seeks to achieve the Fund’s investment objective by investing at least 80% of the value of its net assets (plus borrowings for investment purposes) in fixed income securities such as U.S Government securities, corporate fixed income securities (including junk bonds), mortgage-backed and asset-backed securities.  The fixed income securities in which the Fund may invest may also include municipal securities issued by states, U.S. territories, and possessions, general obligation securities and revenue securities.  The foregoing may include municipal lease obligations and insured municipal securities.  The Fund may also invest in other investment companies that invest in similar fixed income securities and the Fund may count such holdings towards the Fund’s 80% investment policy.

The Fund invests in fixed income securities that primarily have a maturity that is between 0 and 30 years and are rated in the top four rating categories of a Nationally Recognized Statistical Rating Organization, or unrated and deemed to be of comparable quality by the Adviser.  Under normal circumstances, the Fund’s portfolio will have an average dollar weighted maturity between 5 and 9 years and an average duration of 3 to 7 years.  Duration is a measurement of interest rate sensitivity.

The Fund may invest up to 20% of its assets in high-yield securities.  The Fund may also utilize derivatives including futures, interest rate swaps and credit default swaps.  These positions will be used to manage interest rate risk or to create synthetic exposure to particular credits.  The Fund may invest in securities denominated in non-U.S. currencies.  The Fund may also invest in bank loans.

The Adviser may sell an investment or reduce its position if:
·
Revised economic forecasts or interest rate outlook requires a repositioning of the portfolio;
·
The investment subsequently fails to meet the investment criteria;
·
Changing credit profile and/or conditions result in an unacceptable risk condition;
·
A more attractive investment is found; or
·
The Adviser believes that the investment has reached its appreciation potential.

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 strategies and invest, without limitation, in cash or prime quality cash equivalents.
 
 
 
Brown Advisory Total Return Fund
 
 
  client logo

Principal Investment Risks
 
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.  The following are the principal risks that could affect the value of your investment:

·  
Credit Risk.  The value of your investment in the Fund may change in response to changes in the credit ratings of the Fund’s portfolio securities.  Generally, investment risk and price volatility increase as a security’s credit rating declines.

·  
Debt/Fixed Income Securities Risk.  An increase in interest rates typically causes a fall in the value of the debt securities in which the Fund may invest. The value of your investment in the Fund may change in response to changes in the credit ratings of the Fund’s portfolio of debt securities. Securities rated below investment grade (“junk bonds”) are subject to greater risk of loss of your money than higher rated securities. Issuers may (increase) decrease prepayments of principal when interest rates (fall) increase, affecting the maturity of the debt security and causing the value of the security to decline.

·  
Derivatives Risk.  The risk that an investment in derivatives will not perform as anticipated, cannot be closed out at a favorable time or price, or will increase the Fund’s volatility; that derivatives may create investment leverage; that, when a derivative is used as a substitute or alternative to a direct cash investment, the transaction may not provide a return that corresponds precisely with that of the cash investment; that a derivative will not perform in the manner anticipated by the Adviser; or that, when used for hedging purposes, derivatives will not provide the anticipated protection, causing the Fund to lose money on both the derivatives transaction and the exposure the Fund sought to hedge.  Additionally, any derivatives held by the Fund will have counterparty associated risks.  The Fund’s use of derivatives involves the risk that the other party to the derivative contract will fail to make required payments or otherwise to comply with the terms of the contract.  In the event the counterparty to such a derivative instrument becomes insolvent, the Fund potentially could lose all or a large portion of its investment in the derivative instrument.

·  
Interest Rate Risk.  An increase in interest rates typically causes a fall in the value of the fixed income securities in which the Fund may invest.

·  
Investments in Other Investment Companies Risk. Shareholders of the Fund will indirectly be subject to the fees and expenses of the other investment companies in which the Fund invests. In addition, shareholders will be exposed to the investment risks associated with investments in the other investment companies.

·  
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 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 may not meet its investment objective based on the Adviser’s success or failure to implement investment strategies for the Fund.
 
 
 
5

 
 
Brown Advisory Total Return Fund
 
 
  client logo
 
·  
Mortgage- and Asset-Backed Securities Risk.  The Fund may invest in mortgage- and asset-backed securities, which represent “pools” of mortgages or other assets, including consumer loans or receivables held in trust.  In a period of rising interest rates, these securities may exhibit additional volatility.

·  
Municipal Securities Risk.  Adverse economic or political factors in the municipal bond market, including changes in the tax law, could impact the Fund in a negative manner.

·  
New Fund Risk. The Fund is new with no operating history and there can be no assurance that the Fund will grow to or maintain an economically viable size.

·  
Prepayment/Extension Risk.  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.

·  
Rating Agencies Risk.  Ratings are not an absolute standard of quality, but rather general indicators that reflect only the view of the originating rating agencies from which an explanation of the significance of such ratings may be obtained.  There is no assurance that a particular rating will continue for any given period of time or that any such rating will not be revised downward or withdrawn entirely if, in the judgment of the agency establishing the rating, circumstances so warrant.  A downward revision or withdrawal of such ratings, or either of them, may have an effect on the liquidity or market price of the securities in which the Fund invests.  The ratings of securitized assets may not adequately reflect the credit risk of those assets due to their structure.

·  
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 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.
 
Performance Information
 
Performance information for the Fund is not included because the Fund did not have one full calendar year of performance prior to the date of this prospectus. Performance information will be available once the Fund has at least one calendar year of performance. Performance information represents only past performance, before and after taxes, and does not necessarily indicate future results. Updated performance information is available online at www.brownadvisoryfunds.com or by calling 800-540-6807 (toll free).
 
 
 
Brown Advisory Total Return Fund
 
 
  client logo

Management
 
Investment Adviser
Portfolio Manager
Brown Advisory, LLC
Thomas D.D. Graff, CFA has managed the Fund since its inception.
 
Purchase and Sale of Fund Shares
 
You may purchase, exchange or redeem Fund shares on any business day by written request via mail (Brown Advisory Funds, c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701), by wire transfer, by telephone at 800-540-6807 (toll free).  Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly. The minimum initial and subsequent investment amounts for various types of accounts are shown below.

Type of Account
Minimum
Initial
Investment
Minimum
Additional
Investment
Institutional Shares
   
– Standard Accounts
$1,000,000
 $100
Investor Shares
   
– Standard Accounts
 $5,000
 $100
– Traditional and Roth IRA Accounts
 $2,000
 $100
– Accounts with Systematic Investment Plans
 $2,000
 $100
Advisor Shares
   
– Standard Accounts
 $2,000
 $100
– Traditional and Roth IRA Accounts
 $1,000
 N/A
– Accounts with Systematic Investment Plans
 $250
 $100
– Qualified Retirement Plans
 N/A
 N/A
 
Tax Information
 
The Fund’s distributions are taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a fund-supermarket), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment.  Ask your salesperson or visit your financial intermediary’s website for more information.
 
 
 
 
Summary Section
Brown Advisory Strategic Bond Fund
 
  client logo

Brown Advisory Strategic Bond Fund  (formerly, Brown Advisory Tactical Bond Fund)
 
Institutional Shares (Not Available for Sale)
Investor Shares (Not Available for Sale)
Advisor Shares (BXXXX)
 
Investment Objective
 
The Brown Advisory Strategic Bond Fund (the “Fund”) Fund seeks to achieve capital appreciation and income with a low correlation to interest rate movements.
 
Fees and Expenses
 
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
 
Shareholder Fees
(fees paid directly from your investment)
 
Institutional
Shares
 
Investor
Shares
 
Advisor
Shares
Maximum Sales Charge (Load) imposed on Purchases (as a % of the offering price)
 
None
 
None
 
None
Maximum Deferred Sales Charge (Load) imposed on Redemptions (as a % of the sale price)
 
None
 
None
 
None
Redemption Fee (as a % of amount redeemed on shares held for 14 days or less)
 
1.00%
 
1.00%
 
1.00%
Exchange Fee (as a % of amount exchanged on shares held for 14 days or less)
 
1.00%
 
1.00%
 
1.00%
             
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
       
Management Fees
 
0.60%
 
0.60%
 
0.60%
Distribution (12b-1) Fees
 
None
 
None
 
0.25%
Shareholder Servicing Fees
 
None
 
0.15%
 
0.15%
Other Expenses
 
0.33%
 
0.33%
 
0.33%
Acquired Fund Fees and Expenses(1)
 
0.01%
 
0.01%
 
0.01%
Total Annual Fund Operating Expenses
 
0.94%
 
1.09%
 
1.34%
 
(1)  
Acquired Fund Fees and Expenses are indirect fees and expenses that a Fund incurs from investing in the shares of other mutual funds, including money market funds and exchange traded funds.  Please note that the amount of Total Annual Fund Operating Expenses shown in the above table will differ from the “Financial Highlights” section of the Prospectus which reflects the operating expenses of the Fund and does not include indirect expenses such as Acquired Fund Fees and Expenses.

Example
 
The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.  This example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of each period.  The example also assumes that your investment has a 5% annual return each year and that the Fund’s operating expenses remain the same.  Although your actual costs may be higher or lower, based on these assumptions your costs would be:

 
1 Year
3 Years
5 Years
10 Years
Institutional Shares
$
$
$
$
Investor Shares
$
$
$
$
Advisor Shares
$
$
$
$
 
 
 
 
Summary Section
Brown Advisory Strategic Bond Fund
 
  client logo

Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance.  During the most recent fiscal year, the portfolio turnover rate for the Fund was [           ]% of the average value of its portfolio.
 
Principal Investment Strategies
 
Under normal conditions, the Fund will invest at least 80% of the value of its net assets (plus borrowings for investment purposes) in fixed income securities. Brown Advisory, LLC (the “Adviser”) seeks to achieve the Fund’s investment objective by investing in tax-exempt municipal bonds, corporate bonds (including junk bonds), U.S. Treasury bonds, Treasury Inflation Protected Securities (TIPS), non-U.S. dollar bonds, mortgage-backed securities, asset-backed securities, derivatives (including credit default swaps, other swaps, futures and options), bank loans, collateralized loan obligations, and cash equivalents.  Allocations to these investments will be made tactically; meaning that the fund will hold such investments only as long as the Adviser believes the relative value is attractive, which at times may be a matter of days or weeks, as opposed to holding investments for years at a time.
  
The Adviser’s strategy may result in the Fund holding relatively concentrated positions in certain investments and will result in a relatively high degree of portfolio turnover.  The Fund is non-diversified which means that it may invest a significant portion of its assets in the securities of a single issuer or small number of issuers.  The Fund may invest in securities of any maturity and/or credit quality rating. The Fund has no limit in its investment in high-yield securities.  The Fund may utilize derivatives, mutual funds, or exchange-traded funds which invest in any of the previously mentioned types of fixed income securities.  
 
The Adviser may sell an investment or reduce its position if:
 
·
Revised economic forecasts or interest rate outlook requires a repositioning of the portfolio;
·
The investment subsequently fails to meet the investment criteria;
·
Changing credit profile and/or conditions result in an unacceptable risk condition;
·
A more attractive investment is found; or
·
The Adviser believes that the investment has reached its appreciated potential.

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 strategies and invest, without limitation, in cash or prime quality cash equivalents.
 
Principal Investment Risks
 
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.  The following are the principal risks that could affect the value of your investment:

·  
Credit Risk.  The value of your investment in the Fund may change in response to changes in the credit ratings of the Fund’s portfolio securities. Generally, investment risk and price volatility increase as a security’s credit rating declines.
 
 
 
9

 
 
Summary Section
Brown Advisory Strategic Bond Fund
 
  client logo
 
·  
Debt/Fixed Income Securities Risk.  An increase in interest rates typically causes a fall in the value of the debt securities in which the Fund may invest. The value of your investment in the Fund may change in response to changes in the credit ratings of the Fund’s portfolio of debt securities. Securities rated below investment grade (“junk bonds”) are subject to greater risk of loss of your money than higher rated securities. Issuers may (increase) decrease prepayments of principal when interest rates (fall) increase, affecting the maturity of the debt security and causing the value of the security to decline.

·  
Derivatives Risk.  The risk that an investment in derivatives will not perform as anticipated, cannot be closed out at a favorable time or price, or will increase the Fund’s volatility; that derivatives may create investment leverage; that, when a derivative is used as a substitute or alternative to a direct cash investment, the transaction may not provide a return that corresponds precisely with that of the cash investment; that a derivative will not perform in the manner anticipated by the Adviser; or that, when used for hedging purposes, derivatives will not provide the anticipated protection, causing the Fund to lose money on both the derivatives transaction and the exposure the Fund sought to hedge.  Additionally, any derivatives held by the Fund will have counterparty associated risks.  The Fund’s use of derivatives involves the risk that the other party to the derivative contract will fail to make required payments or otherwise to comply with the terms of the contract.  In the event the counterparty to such a derivative instrument becomes insolvent, the Fund potentially could lose all or a large portion of its investment in the derivative instrument.

·  
ETF Risk.  ETFs 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. Shareholders of the Fund will indirectly be subject to the fees and expenses of the individual ETFs in which the Fund invests.

·  
Foreign Investing Risk.

·  
Inflation-Indexed Securities Risk.  The risk that the Consumer Price Index moves in a manner that is adverse to the Fund’s positions in Treasury Inflation Protected Securities.

·  
Interest Rate Risk.  An increase in interest rates typically causes a fall in the value of the fixed income securities in which the Fund may invest.

·  
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 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 may not meet its investment objective based on the Adviser’s success or failure to implement investment strategies for the Fund.

·  
Modeled Trading Strategies Risk.  The Adviser will make use of trading models to make tactical decisions of when to buy or sell securities.  These models could fail to produce correct trading signals and thus adversely impact the Fund’s return.
 
 
 
10

 
 
Summary Section
Brown Advisory Strategic Bond Fund
 
  client logo
 
·  
Municipal Securities Risk.  Adverse economic or political factors in the municipal bond market, including changes in the tax law, could impact the Fund in a negative manner.

·  
Non-Diversification Risk.  Investment by the Fund in securities of a limited number of issuers exposes it to greater market risk and potential monetary losses than if its assets were diversified among the securities of a greater number of issuers.

·  
Non-Investment Grade (Junk Bond) Securities Risk.  Below investment grade debt securities (also known as “junk bonds”) are speculative and involve a greater risk of default and price change due to changes in the issuer’s creditworthiness.  The market prices of these debt securities may fluctuate more than the market prices of investment grade debt securities and may decline significantly in periods of general economic difficulty.

·  
Portfolio Turnover Risk.  The Adviser’s tactical investment process is expected to result in a high portfolio turnover rate.  High portfolio turnover involves correspondingly greater expenses to a Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities.

·  
Rating Agencies Risk.  Ratings are not an absolute standard of quality, but rather general indicators that reflect only the view of the originating rating agencies from which an explanation of the significance of such ratings may be obtained.  There is no assurance that a particular rating will continue for any given period of time or that any such rating will not be revised downward or withdrawn entirely if, in the judgment of the agency establishing the rating, circumstances so warrant.  A downward revision or withdrawal of such ratings, or either of them, may have an effect on the liquidity or market price of the securities in which the Fund invests.  The ratings of securitized assets may not adequately reflect the credit risk of those assets due to their structure.

·  
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 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.
 
 
11

 
 
Summary Section
Brown Advisory Strategic Bond Fund
 
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Performance Information
 
The following performance information provides some indication of the risks of investing in the Fund.  The chart shows the Fund’s performance of Advisor Shares.  The table shows how the average annual returns of Advisor Shares for one year and since inception compare to a broad-based market index.

The Fund is the successor to the investment performance of the Brown Advisory Tactical Bond Fund (the “Predecessor Fund”) as a result of the reorganization of the Predecessor Fund into the Fund on October 19, 2012. Accordingly, the performance information shown below for periods prior to October 19, 2012 is that of the Predecessor Fund.  The Predecessor Fund was advised by the Adviser and had the same investment objective and strategies as the Fund prior to October 31, 2014.  Effective October 31, 2014, certain changes to the Fund’s principal investment strategies were implemented and the name of the Fund was changed.

Performance information represents only past performance, before and after taxes, and does not necessarily indicate future results.  Updated performance information is available online at www.brownadvisoryfunds.com or by calling 800-540-6807 (toll free).

Brown Advisory Strategic Bond Fund – Advisor Shares
Calendar Year Total Return
 
Total Return Fund Prospectus Performance Chart
The Fund’s calendar year-to-date total return as of September 30, 2014 was [    ]%.  During the period shown in the chart, the highest quarterly return was [     ]% for the quarter ended [                       ] and the lowest quarterly return was [     ]% for the quarter ended [                       ].

Brown Advisory Strategic Bond Fund
Average Annual Total Returns
 
For the periods ended December 31, 2013
1 Year
Since Inception
(9/30/11)
Advisor Shares
   
– Return Before Taxes
-0.34%
-0.08%
– Return After Taxes on Distributions
[     ]%
[     ]%
– Return After Taxes on Distributions and Sale of Fund Shares
[     ]%
[     ]%
Barclays Intermediate U.S. Aggregate Bond Index
(reflects no deduction for fees, expenses and taxes)
-1.02%
1.51%
 

 
12

 
 
Summary Section
Brown Advisory Strategic Bond Fund
 
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After-tax returns are calculated using the historical highest individual Federal marginal income tax rates and do not reflect the impact of state and local taxes.  Actual after-tax returns depend on an investor’s tax situation and may differ from those shown.  In certain cases, the figure representing “Return after Taxes on Distributions and Sale of Fund Shares” may be higher than the other return figures for the same period, since a higher after-tax return results when a capital loss occurs upon redemption and provides an assumed tax deduction that benefits the investor.  After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.  After-tax returns are shown for Advisor Shares only.  After-tax returns for Investor Shares and Institutional Shares would vary.
 
Management
 
Investment Adviser
Portfolio Managers
Brown Advisory, LLC
Thomas D.D. Graff, CFA has been a manager of the Fund since its inception in 2011 and
Robert H. Snyder has been a manager of the Fund since October 2014.
 
Purchase and Sale of Fund Shares
 
You may purchase, exchange or redeem Fund shares on any business day by written request via mail (Brown Advisory Funds, c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701), by wire transfer, by telephone at 800-540-6807 (toll free).  Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly. The minimum initial and subsequent investment amounts for various types of accounts are shown below.

Type of Account
Minimum
Initial
Investment
Minimum
Additional
Investment
Institutional Shares
   
– Standard Accounts
$1,000,000
 $100
Investor Shares
   
– Standard Accounts
 $5,000
 $100
– Traditional and Roth IRA Accounts
 $2,000
 $100
– Accounts with Systematic Investment Plans
 $2,000
 $100
Advisor Shares
   
– Standard Accounts
 $2,000
 $100
– Traditional and Roth IRA Accounts
 $1,000
 N/A
– Accounts with Systematic Investment Plans
 $250
 $100
– Qualified Retirement Plans
 N/A
 N/A
 
Tax Information
 
The Fund’s distributions are taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a fund-supermarket), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment.  Ask your salesperson or visit your financial intermediary’s website for more information.

 
 
Funds’ Principal Investment Strategies
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Principal Investment Strategies
 
The Fund seeks to provide a high level of current income consistent with preservation of principal.  Under normal circumstances, the Fund invests at least 80% of the value of its net assets (plus borrowings for investment purposes) in fixed income securities such as U.S. Government securities, corporate fixed income securities, mortgage-backed and asset-backed securities (“80% Policy”).  The fixed income securities in which the Fund may invest may also include municipal securities issued by states, U.S. territories, and possessions, general obligation securities and revenue securities.  The foregoing may include municipal lease obligations and insured municipal securities.  The Fund may also invest in other investment companies that invest in similar fixed income securities and the Fund may count such holdings towards the Fund’s 80% Policy.  The Fund must provide shareholders with 60 days’ prior written notice if it changes its 80% Policy.

Portfolio Maturity.  The Fund invests in fixed income securities that primarily have a maturity that is between 0 and 30 years.  Under normal circumstances, the Fund’s portfolio will have an average dollar weighted maturity between 5 and 9 years (“Maturity Policy”).  The Fund must provide shareholders with 60 days’ prior written notice if it changes the limitations associated with its Maturity Policy.  The stated average maturity of the Fund may be different from the weighted average maturity due to several factors including prepayment patterns as well as call and put features of the fixed income securities held by the Fund.

The Fund also expects to have an average duration of 3 to 7 years.  Duration is a measurement of interest rate sensitivity. For example, if interest rates increase by 1%, under the Fund’s duration policy, the value of the Fund may decrease between 3% to 7%.

Portfolio Securities Credit Ratings.  The Fund may invest an unlimited amount in fixed income securities, if at the time of its purchase, the fixed income securities are rated in the top four rating categories of a Nationally Recognized Statistical Rating Organization (“NRSRO”) or is unrated and deemed to be of comparable quality by the Adviser.  The Fund may invest up to 20% of its assets in high-yield securities.

The Adviser’s Process — Purchasing Portfolio Securities.  For macro-level portfolio decisions, such as interest rate risk (duration) and maturity structure (yield curve positioning), the Adviser seeks positions that have a favorable upside/downside balance in various economic scenarios.  The Adviser avoids investing based on specific forecasts, rather, it analyzes a wide variety of potential macro outcomes. The Adviser aims to have the Fund’s portfolio perform especially well in certain scenarios but still perform reasonably well in alternative scenarios.

Credit positions are selected through a fundamental, bottom-up process.  In particular, the Adviser seeks fixed income securities that it believes to be fundamentally undervalued and/or where the issuer’s credit profile is improving.  This may allow the portfolio to not only experience an attractive level of income generation but may also realize capital gains as the trading price of the security improves.
 

 
Additional Information about the
Funds’ Principal Investment Strategies
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The Adviser’s Process — Selling Portfolio Securities.  The Adviser may sell a fixed income security or reduce its position if:
 
·
Revised economic forecasts or interest rate outlook requires a repositioning of the portfolio;
 
·
The security subsequently fails to meet the  investment criteria;
 
·
Changing credit profile and/or conditions result in an unacceptable risk condition;
 
·
A more attractive security is found or funds are needed for another purpose; or
 
·
The Adviser believes that the security has reached its appreciation potential.

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 strategies and invest, without limitation, in cash or prime quality cash equivalents (including commercial paper, certificates of deposit, banker’s acceptances and time deposits).  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:
 
·
Seek income
 
·
Seek capital preservation
 
·
Are pursuing a long-term investment goal
 
·
Are willing to accept the risks of investing in fixed income securities.

The Fund may not be appropriate for you if you:
 
·
Are pursuing a short-term investment goal or are investing emergency reserves
 
·
Are seeking capital appreciation
 
·
Cannot tolerate fluctuation in the value of your investments.
 

 
 
Summary Section
Brown Advisory Strategic Bond Fund
 
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Brown Advisory Strategic Bond Fund
 
Principal Investment Strategies
 
Under normal conditions, the Fund will invest at least 80% of the value of its net assets (plus borrowings for investment purposes) in fixed income securities. The Adviser seeks to achieve the Fund’s investment objective by investing in tax-exempt municipal bonds, corporate bonds (including junk bonds), U.S. Treasury bonds, Treasury Inflation Protected Securities (TIPS), mortgage-backed securities, asset-backed securities, derivatives (including credit default swaps, other swaps, futures and options), bank loans, collateralized loan obligations, and cash equivalents.  Allocations to these investments will be made tactically; meaning that the fund will hold such investments only as long as the Adviser believes the relative value is attractive, which at times may be a matter of days or weeks, as opposed to holding investments for years at a time.
  
The Adviser’s strategy may result in the Fund holding relatively concentrated positions in certain investments and will result in a relatively high degree of portfolio turnover.  The Fund is non-diversified.  The Fund may invest in securities of any maturity and/or credit quality rating.  The Fund has no limit in its investment in high-yield securities.  The Fund may utilize derivatives, mutual funds, or exchange-traded funds which invest in any of the previously mentioned types of fixed income securities.  
 
The Adviser may sell an investment or reduce its position if:
 
·
Revised economic forecasts or interest rate outlook requires a repositioning of the portfolio;
·
The investment subsequently fails to meet the investment criteria;
·
Changing credit profile and/or conditions result in an unacceptable risk condition;
·
A more attractive investment is found; or
·
The Adviser believes that the investment has reached its appreciated potential.

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 strategies and invest, without limitation, in cash or prime quality cash equivalents.
 
Cash Holdings and Temporary Defensive Positions. Although the Fund will normally hold a portfolio of fixed-income securities, the Fund is not required to be fully invested in such securities and may maintain a significant portion of its total assets in cash and securities generally considered to be cash equivalents, including, but not limited to: U.S. Government securities; money-market funds; and other high quality money market instruments.  Cash and cash reserves may also include foreign securities, including but not limited to, short-term obligations of foreign governments or other high quality foreign money-market instruments.  To the extent the Fund invests in short-term high-quality debt obligations of foreign governments and other non-U.S. issuers, the securities of such foreign governments and other non-U.S. issuers will generally have a maturity of one year or less and a credit rating of “A” or better by S&P or a similar rating by another NRSRO.

The Adviser believes that a certain amount of liquidity in the Fund’s portfolio is desirable both to meet operating requirements and to take advantage of new investment opportunities.  Under adverse market conditions, when the Fund is unable to find sufficient investments meeting its criteria, cash and cash reserves may comprise a significant percentage of the Fund’s total assets.  When the Fund holds a significant portion of assets in cash and cash reserves, it may not meet its investment objective.  To the extent that the Fund invests in ETFs or uses a money market mutual fund for its cash position, there will be some duplication of expenses because the Fund would bear its pro rata portion of such money market mutual fund’s management fees and operational expenses.
 
 
 
 
Summary Section
Brown Advisory Strategic Bond Fund
 
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Who May Want to Invest in the Fund
 
The Fund may be appropriate for you if you:
 
·
Are seeking capital appreciation;
·
Are pursuing a long-term investment goal; or
·
Are seeking alternatives to typical long-only fixed income investments.

The Fund may not be appropriate for you if you:
 
·
Are pursuing a short-term investment goal or are investing emergency reserves;
·
Are seeking income generation;
·
Cannot tolerate fluctuation in the value of your investments; or
·
Cannot tolerate high turnover investments.
 
 
 
 

Table of Investment Terms

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

 
Brown Advisory
 Total Return
 Fund
Brown Advisory
Strategic Bond
Fund
ETFs(1)
 
ü
Debt/Fixed Income Securities(2)
ü
ü
Bond(3)
ü
ü
Investment Grade Security(4)
ü
ü
Municipal Security(5)
ü
ü
NRSRO(6)
ü
ü
U.S. Government Security(7)
ü
ü
Note(8)
ü
ü
Maturity(9)
ü
ü
Mortgage-Backed Security(10)
ü
ü
Asset-Backed Security(11)
ü
ü
Yield Curve(12)
ü
ü
Stated Average Maturity(13)
ü
ü
Weighted Average Maturity(14)
ü
ü
Derivatives(15)
 
ü
Duration(16)
ü
ü

 
(1)  
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.
 
(2)  
Debt/Fixed Income Securities means a security, such as a bond or note, that obligates the issuer to pay the security owner a specific sum of money (interest) at set intervals as well as to repay the principal amount of the security at its maturity.
 
(3)  
Bond means a fixed income security with a long-term maturity, usually 5 years or longer.
 
(4)  
Investment Grade Security means a fixed income security rated in one of the four highest long-term or two short-term ratings categories by an NRSRO or unrated and determined to be of comparable quality by the Fund’s Adviser at the time of purchase.
 
(5)  
Municipal Security means a fixed income security issued by or on behalf of a state, its local governments and public financing authorities, and by U.S. territories and possessions.
 
(6)  
NRSRO means a “nationally recognized statistical rating organization,” such as Standard & Poor’s, that rates fixed income securities by relative credit risk.
 
(7)  
U.S. Government Security means a fixed income security issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
 
 
Note means a fixed income security with a short-term maturity, usually less than 1 year.
 
(9)  
Maturity means the date on which a fixed income security is (or may be) due and payable.
 
(10)  
Mortgage-Backed Security means a fixed income security representing an interest in a pool of underlying mortgage loans.
 
 
 
 
Table of Investment Terms
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(11)  
Asset-Backed Security means a fixed income security representing an interest in an underlying pool of assets such as automobile loans or credit card receivables.
 
(12)  
Yield Curve means a graph that plots the yield of all fixed income securities of similar quality against the securities’ maturities.
 
(13)  
Stated Average Maturity means the dollar weighted maturity of the portfolio without consideration for potential changes in cash flows of the portfolio’s securities.
 
(14)  
Weighted Average Maturity refers to the dollar weighted average maturity of the portfolio, accounting for potential changes in cash flows of the portfolio’s securities due to prepayments on mortgage backed and asset backed securities, puts and calls, and other foreseen changes to stated cash flows.
 
(15)  
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).  A 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 Adviser may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by a Fund will succeed.
 
(16)  
Duration is a measure of the expected life of a fixed income instrument that is used to determine the sensitivity of a security’s price to changes in interest rates.  For example, the value of a portfolio of fixed income securities with an average duration of two years would generally be expected to decline by approximately 2% if interest rates rose by one percentage point.  “Effective” duration is a measure of a Fund’s portfolio duration adjusted for the anticipated effect of interest rate changes on bond and mortgage pre-payment rates.  The effective duration of a Fund’s investment portfolio may vary materially from its target, from time to time, and there is no assurance that the effective duration of a Fund’s investment portfolio will not exceed these limits.
 

 
 

An investment in a 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. The risks are presented in alphabetical order, not in order of importance or likelihood of occurrence.

 
Brown Advisory
Total Return
Fund
Brown Advisory
Strategic Bond
Fund
Credit Risk
ü
ü
Debt/Fixed Income Securities Risk
ü
ü
Derivatives Risk
 
ü
ETF Risk
 
ü
Inflation-Indexed Securities Risk
 
ü
Interest Rate Risk
ü
ü
Investments in Other Investment Companies Risk
 
ü
Liquidity Risk
ü
ü
Management Risk
ü
ü
Modeled Trading Strategies Risk
 
ü
Mortgage- and Asset-Backed Securities Risk
ü
 
Municipal Securities Risk
 
ü
New Fund Risk
ü
 
Non-Diversification Risk
 
ü
Non-Investment Grade Securities Risk
 
ü
Portfolio Turnover Risk
 
ü
Prepayment/Extension Risk
ü
 
Ratings Agency Risk
 
ü
U.S. Government Securities Risk
 
ü
Valuation Risk
ü
ü

As with all mutual funds, there is the risk that you could lose all or a portion of your investment in a Fund.  An investment in a 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 a Fund will achieve its investment objective, and an investment in a 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:

Credit Risk
If a Fund invests in fixed income securities, the value of your investment in the Fund may change in response to the credit ratings of that Fund’s portfolio securities.  The degree of risk for a particular security may be reflected in its credit rating.  Generally, investment risk and price volatility increase as a security’s credit rating declines.  The financial condition of an issuer of a fixed income security held by a Fund may cause it to default or become unable to pay interest or principal due on the security.  A Fund cannot collect interest and principal payments on a fixed income security if the issuer defaults.  Investments in fixed income securities that are issued by U.S. Government sponsored entities such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Association, and the Federal Home Loan Banks involve credit risk as they are not backed by the full faith and credit of the U.S. Government.

Debt/Fixed Income Securities Risk
The value of your investment in a Fund may change in response to changes in interest rates.  An increase in interest rates typically causes a fall in the value of the debt securities in which the Fund invests.  The longer the duration of a debt security, the more its value typically falls in response to an increase in interest rates.  The value of your investment in a Fund may change in response to the credit ratings of the Fund’s portfolio of debt securities.  The degree of risk for a particular security may be reflected in its credit rating.  Generally, investment risk and price volatility increase as a security’s credit rating declines. The financial condition of an issuer of a debt security held by a Fund may cause it to default or become unable to pay interest or principal due on the security.  A Fund cannot collect interest and principal payments on a debt security if the issuer defaults.  Prepayment and extension risks may occur when interest rates decline and issuers of debt securities experience acceleration in prepayments.  The acceleration can shorten the maturity of the debt security and force the Fund to invest in securities with lower interest rates, reducing the Fund’s return.  Issuers may decrease prepayments of principal when interest rates increase, extending the maturity of the debt security and causing the value of the security to decline.  Distressed debt securities involve greater risk of default or downgrade and are more volatile than investment grade securities.  Distressed debt securities may also be less liquid than higher quality debt securities.
 

 
 
Principal Risks
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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 a Fund’s performance.  The successful use of derivatives generally depends on the manager’s ability to predict market movements.

A Fund may use derivatives in various ways.  A 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.  A Fund may use derivatives to hedge (or reduce) its exposure to a portfolio asset or risk.  A Fund may use derivatives for leverage.  A Fund may also use derivatives to manage cash.

Derivatives are subject to a number of risks described elsewhere in this section, such as liquidity risk, interest rate risk, credit risk and general market risks.  A Fund’s use of derivatives may entail risks greater than, or possibly different from, such risks and other Principal Risks to which the Fund is exposed, as described below.  Certain of the different risks to which a Fund might be exposed due to its use of derivatives include the following:

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 a Fund may use some derivates 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 Adviser is incorrect in its forecast of default risks, market spreads or other applicable factors, a Fund’s investment performance would diminish compared with what it would have been if these techniques were not used.  Moreover, even if the 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.  A 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 a Fund, to segregate assets or enter into offsetting positions in connection with investments in derivatives.  Such segregation will not limit a 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.

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, a 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 Adviser may not be able to liquidate a Fund’s holdings at the most optimal time, adversely affecting the Fund’s performance.

Inflation-Indexed Securities Risk
The value of inflation-indexed securities such as TIPS generally fluctuates in response to changes in real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation.  Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of TIPS.  In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of TIPS.  Although the principal value of TIPS declines in periods of deflation, holders at maturity receive no less than the par value of the bond.  However, if a Fund purchases TIPS in the secondary market whose principal values have been adjusted upward due to inflation since issuance, the Fund may experience a loss if there is a subsequent period of deflation.  If inflation is lower than expected during the period the Fund holds TIPS, the Fund may earn less on the security than on a conventional bond.

Interest Rate Risk
If a Fund invests in fixed income securities, the value of your investment in that Fund may change in response to changes in interest rates.  An increase in interest rates typically causes a fall in the value of the securities in which a Fund invests.  The longer the duration of a fixed income security, the more its value typically falls in response to an increase in interest rates.

Investments in Other Investment Companies Risk.  Shareholders of the Funds will indirectly be subject to the fees and expenses of the other investment companies (principally, money market funds) in which a Fund invests. In addition, shareholders will be exposed to the investment risks associated with investments in the other investment companies.
 

 
 
Principal Risks
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Liquidity Risk
Certain fixed income securities held by a Fund may be difficult (or impossible) to sell at the time and at the price the Adviser would like.  As a result, a Fund may have to hold these securities longer than it would like and may forego other investment opportunities.  There is the possibility that a 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
Each Fund is actively managed and its performance may reflect the Adviser’s ability to make decisions which are suited to achieving a Fund’s investment objectives.  Due to its active management, a Fund could under perform other mutual funds with similar investment objectives.

Mortgage and Asset-Backed Securities Risk
Mortgage-related securities are subject to prepayment risk as well as the risks associated with investing in debt securities in general. If interest rates fall and the loans underlying these securities are prepaid faster than expected, the Fund may have to reinvest the prepaid principal in lower yielding securities, thus reducing the Fund's income. Conversely, if interest rates increase and the loans underlying the securities are prepaid more slowly than expected, the expected duration of the securities may be extended, reducing the cash flow for potential reinvestment in higher yielding securities.

Modeled Trading Strategies Risk
This risk includes risks associated with the use of the Adviser’s model of quantitative inputs which may not accurately predict future market conditions, or the proper time to buy or sell securities.  To the extent the model does not work as intended, the Fund may experience a greater loss or a lower return than if the model had not been used.  The availability of data from the model is an important component of the Adviser’s ability to execute its strategy.

Municipal Securities Risk. Changes in economic, business or political conditions relating to a particular state, or states, or type of projects may have a disproportionate impact on the Fund. Municipalities continue to experience difficulties in the current economic and political environment. National governmental actions, such as the elimination of tax-exempt status, also could affect performance. In addition, a municipality or municipal project that relies directly or indirectly on national governmental funding mechanisms may be negatively affected by the national government’s current budgetary constraints.  Municipal obligations that the Fund may acquire include municipal lease obligations, which are issued by a state or local government or authority to acquire land and a wide variety of equipment and facilities. If the funds are not appropriated for the following year’s lease payments, then the lease may terminate, with the possibility of default on the lease obligation and significant loss to the Fund.  The repayment of principal and interest on some of the municipal securities in which the Fund may invest may be guaranteed or insured by a monoline insurance company or other financial institution. If a company insuring municipal securities in which the Fund invests experiences financial difficulties, the credit rating and price of the security may deteriorate.  The Fund may invest more heavily in bonds from certain cities, states or regions than others, which may increase the Fund’s exposure to losses resulting from economic, political, or regulatory occurrences impacting these particular cities, states or regions.

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.
 

 
 
Principal Risks
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Non-Diversification Risk
If a Fund is “non-diversified,” its investments are not required to meet certain diversification requirements under Federal law. A “non-diversified” Fund is permitted to invest a greater percentage of its assets in the securities of a single issuer than a diversified fund. Thus, the Fund may have fewer holdings than other funds. As a result, a decline in the value of those investments would cause the Fund’s overall value to decline to a greater degree than if the Fund held a more diversified portfolio.
 
Non-Investment Grade Securities Risk
Securities rated below investment grade, i.e., BA or BB and lower (“junk bonds”), are subject to greater risks of loss of your money than higher rated securities.  Compared with issuers of investment grade fixed-income securities, junk bonds are more likely to encounter financial difficulties and to be materially affected by these difficulties.

Portfolio Turnover Risk
Frequent trading increases a 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.

Prepayment/Extension Risk
If a Fund invests in fixed income securities, the Fund may be forced to invest in securities with lower yields and thus reducing its income if issuers prepay certain fixed income securities.  A Fund may be exposed to greater prepayment risk because a Fund invests in mortgage-backed and asset-backed securities.  Issuers may decrease prepayments of principal when interest rates increase, extending the average life and duration of a fixed income security and causing the value of the security to decline.  There is a greater risk that a Fund will lose money due to extension risk because a Fund invests in mortgage-backed and asset-backed securities.

Rating Agencies Risk
Ratings are not an absolute standard of quality, but rather general indicators that reflect only the view of the originating rating agencies from which an explanation of the significance of such ratings may be obtained.  There is no assurance that a particular rating will continue for any given period of time or that any such rating will not be revised downward or withdrawn entirely if, in the judgment of the agency establishing the rating, circumstances so warrant.  A downward revision or withdrawal of such ratings, or either of them, may have an effect on the liquidity or market price of the securities in which the Fund invests.  The ratings of securitized assets may not adequately reflect the credit risk of those assets due to their structure.

Rating agencies may fail to make timely changes in credit ratings and an issuer's current financial condition may be better or worse than a rating indicates.  In addition, rating agencies are subject to an inherent conflict of interest because they are often compensated by the same issuers whose securities they grade.

U.S. Government Securities Risk
Although a 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. 
 

 
 
Principal Risks
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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 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.
 
 
 
 

Each Fund is a series of Brown Advisory Funds (the “Trust”).  The business of the Trust and each Fund is managed under the oversight of the Board of Trustees (the “Board”).  The Board meets periodically to review each Fund’s performance, monitor investment activities and practices, and discuss other matters affecting each Fund.  Additional information regarding the Board, as well as the Trust’s executive officers, may be found in the Funds’ Statement of Additional Information (“SAI”).
 
 
Brown Advisory, LLC.  Each 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”) have provided investment advisory and management services to clients for over 10 years. As of September 30, 2014, Brown had approximately $[   ] billion in assets under management and advisement in both discretionary and non-discretionary accounts.
 
The Adviser receives an annual advisory fee from each Fund at an annual rate of each Fund’s average annual daily net assets as indicated below.  The currently effective annual advisory fee for each of the Funds is as follows:

 
Contractual
Advisory Fee
 
Net Advisory Fee
Received for fiscal
year ended
June 30, 2014
Brown Advisory Total Return Fund*
0.30%
  
NA
Brown Advisory Strategic Bond Fund
0.60%
 
[   ]
 
* The Fund commenced operations on October 31, 2014.

A discussion summarizing the basis on which the Board approved the Investment Advisory Agreement between the Adviser and the Trust on behalf of the Funds is included in the Funds’ semi-annual report to shareholders dated December 31, 2014.

Subject to the general oversight of the Board, the Adviser is directly responsible for making the investment decisions for the Funds.

The Adviser also provides certain business management services to each 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 Funds, which includes monitoring the Funds’ relationships with third-party service providers to the Funds and other related business management services.  For these services, each 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 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 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.
 

 
 
Management Other Service
Providers/Fund Expenses
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Brown Advisory Total Return Fund

Mr. Tom Graff is responsible for day-to-day management of the Fund’s portfolio.

Tom Graff, CFA is a member of the Fixed Income Investment Team at Brown.  He primarily concentrates on the management, trading and analysis of taxable bonds.  Prior to joining Brown in 2010, Mr. Graff was a Managing Director at Cavanaugh Capital Management where he worked since 1999.  In that role, he served as an assistant portfolio manager and was responsible for research, trading of taxable securities, and portfolio analytics.  Mr. Graff obtained the Chartered Financial Analyst designation in 2002.  Mr. Graff is also a freelance writer for TheStreet.com, offering daily insight into fixed income markets.  Mr. Graff received a B.A. from Loyola University Maryland in 1999.

Brown Advisory Strategic Bond Fund

Mr. Tom Graff and Mr. Robert Snyder are jointly responsible for day-to-day management of the Fund’s portfolio.

Tom Graff, CFA – see above for Mr. Graff’s biographical information.

Robert H. Snyder is a Portfolio Manager at Brown Advisory and a member of the Fixed Income Investment Team.  Prior to joining the firm in 2014, he was Principal and member of the risk allocation and credit committees at Kingsland Capital, where his primary focus was portfolio construction and management of high yield assets.  Mr. Snyder’s experience includes both high yield par and distressed credit analysis across multiple industry sectors and security-types.  Mr. Snyder graduated from Cornell University in 1997 with a BA in Economics.
 
 
The Funds’ SAI provides additional information about each Portfolio Manager’s compensation, other accounts managed by the Portfolio Managers and the Portfolio Managers’ ownership of shares in the Funds they manage.

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

Quasar Distributors, LLC (the “Distributor”) serves as each Fund’s Distributor and principal underwriter in connection with the offering of each 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 Funds.  The Transfer Agent, the Distributor and U.S. Bank N.A. are affiliates.
 
 
In addition to the advisory fees discussed above, each Fund incurs other expenses such as custodian, transfer agency, interest, Acquired Fund Fees and Expenses and other customary Fund expenses.  (Acquired Fund Fees and Expenses are indirect fees that a Fund incurs from investing in the shares of other investment companies.)  The Adviser has contractually agreed to waive its fees and/or reimburse certain expenses (exclusive of any front-end or contingent deferred sales loads, taxes, interest, brokerage commissions, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization and extraordinary expenses) in order to limit the Total Annual Fund Operating Expenses to the amounts shown below of each Class’s average daily net assets through October 31, 2016.
 
 
 
 
Management Other Service
Providers/Fund Expenses
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Institutional
Shares
Investor
Shares
Advisor
Shares
Brown Advisory Total Return Fund
[     ]%
[       ]%
[      ]%
Brown Advisory Strategic Bond Fund
[     ]%
[      ]%
[       ]%

The contractual waivers and expense reimbursements may be changed or eliminated at any time by the Board of Trustees, on behalf of a Fund, upon 60 days written notice to the Adviser. The contractual waivers and expense reimbursements may not be terminated by the Adviser without the consent of the Board of Trustees. The Adviser may recoup any waived amount from a Fund pursuant to this agreement if such reimbursement does not cause a Fund to exceed existing expense limitations and the reimbursement is made within three years after the year in which the Adviser incurred the expense.

In addition, in connection with the Brown Advisory Total Return Fund’s investments in the Brown Advisory Mortgage Securities Fund, another fund managed and advised by the Adviser that may be invested in by the Adviser, the Adviser has contractually agreed to waive all or any portion of the Brown Advisory Total Return Fund’s advisory management fee that would otherwise be paid by the Fund to the Adviser in an amount equal to the separate advisory management fee indirectly paid by the Brown Advisory Total Return Fund to the Brown Advisory Mortgage Securities Fund.  The contractual waiver may be changed or eliminated at any time by the Board of Trustees, on behalf of the Fund, upon 60 days written notice to the Adviser.  The contractual waiver may not be terminated by the Adviser without the consent of the Board of Trustees.
 
 
 
 
The Brown Advisory Total Return Fund and the Brown Advisory Strategic Bond Fund each offer three classes of shares, Institutional Shares, Investor Shares and Advisor Shares.  (Not all of the share classes are currently being offered for sale.)   Each class of shares is designed for specific Investors.

The following is a summary of the differences between the three classes for each of the Funds:
 
 
Institutional
Shares
Investor
Shares
Advisor
Shares
Eligible Shareholder
(i) Investors who meet the investment minimum for Institutional Shares;
(ii) Certain institutions  (financial institutions, corporations, trusts, endowments, foundations, government entities, estates and religious and charitable organizations investing on their own behalf);
 
(iii) Certain fund of funds;
 
(iv) Certain pension plans whose sponsors and/or administrators have entered into arrangements with the Funds’ distributor;
 
(v) Certain investors investing through omnibus accounts held by financial intermediaries that charge transaction fees and have entered into arrangements with the Funds’ distributor to offer Institutional Shares;
 
(vi) Current and former trustees of the Funds; and
 
(vii) Certain other investors that have been approved by the Funds.
 
Notwithstanding the above, the Funds reserve the right to broaden or limit the eligible shareholders.
 
(i) Investors who meet the investment minimum for Investor Shares;
 
(ii) Certain investors investing through omnibus accounts held by financial intermediaries that do not charge transaction fees and have entered into arrangements with the Funds’ distributor to offer Investor Shares.
 
(i) Investors who meet the investment minimum for Advisor Shares;
 
(ii) Certain investors investing through omnibus accounts held by financial intermediaries that charge transaction fees and have entered into arrangements with the Funds’ distributor to offer Advisor Shares; and
 
(iii) Certain retirement plans whose sponsors and/or administrators have entered into arrangements with the Funds’ distributor.
Initial Sales Charge
None
None
None
 
Contingent Deferred Sales Charge
None
None
None
 
Redemption/
Exchange Fee
1.00% if shares are redeemed 14 days or less from purchase
1.00% if shares are redeemed 14 days or less from purchase
1.00% if shares are redeemed 14 days or less from purchase
 
 
 
 
Choosing a Share Class
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Institutional
Shares
Investor
Shares
Advisor
Shares
Distribution/Service (12b-1) Fees
None
None
0.25% of the class’ average
daily net assets for each Fund
 
Shareholder Service Fees
None
0.05% of the Brown Advisory Total Return Fund’s class’ average daily net assets.
 
0.15% of the Brown Advisory Strategic Bond Fund’s class’ average daily net assets.
0.05% of the Brown Advisory Total Return Fund’s class’ average daily net assets.
 
0.15% of the Brown Advisory Strategic Bond Fund’s class’ average daily net assets.
 
Annual Expenses
Lowest expense ratio because there is no Rule 12b-1 distribution/service fee or shareholder service fees.
 
Higher fees than Institutional Shares because of shareholder service fees and lower fees than Advisor Shares because no Rule 12b-1 distribution/service fee.
Highest expense ratio because of Rule 12b-1 distribution/service fee and shareholder service fees.
Initial Minimum Investment
$1,000,000
$5,000
$2,000
 
       
 
 
The Trust has adopted a Rule 12b-1 distribution plan under which a Fund is authorized to pay to the Distributor or such other entities as approved by the Board, as compensation for the distribution-related and/or shareholder services provided by such entities, an aggregate fee equal to the percentage shown below of the average daily net assets of Advisor Shares, as applicable.  The Distributor may pay any or all amounts received under the Rule 12b-1 Plan to other persons, including the Adviser, for any distribution service or activity designed to retain Fund shareholders.

 
Advisor
Shares
Brown Advisory Total Return Fund
0.25%
Brown Advisory Strategic Bond Fund
0.25%

Because the Advisor Shares of each Fund pay distribution and shareholder service fees on an ongoing basis, your investment cost over time may be higher than paying other types of sales charges.

 
The Trust has adopted a Shareholder Servicing Plan under which the Brown Advisory Strategic Bond Fund may pay a fee of up to 0.15% for shareholder services provided to the Fund’s Investor Shares and Advisor Shares by financial institutions, including the Adviser.   For the Brown Advisory Total Return Fund, the Trust has adopted a Shareholder Servicing Plan under which the Fund may pay a fee of up to 0.05% for shareholder services provided to the Fund’s Investor Shares and Advisor Shares by financial institutions, including the Adviser. The types of services for which entities may be compensated under the terms of the Shareholder Servicing Plan include various types of shareholder administrative support services such as assisting shareholders with their fund accounts and records, their fund purchase and redemption orders and other similar types of non-distribution related services involving the administrative servicing of shareholder accounts.  These shareholder servicing fees may be increased without shareholder approval.
 
 
 
Choosing a Share Class
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In addition to dealer reallowances and payments made by each Fund for distribution and shareholder servicing, the Adviser or its affiliates may make additional payments (“Additional Payments”) to certain selling or shareholder servicing agents for the Funds, which includes broker-dealers.  The Adviser has entered into an arrangement with its affiliated broker/dealer, Brown Advisory Securities, LLC, through which investors may purchase or redeem Fund shares.  Accordingly, the Adviser may, out of its own resources, compensate Brown Advisory Securities, LLC for the sales efforts of Brown Advisory Securities, LLC.  These Additional Payments are made in connection with the sale and distribution of shares of the Funds or for services to a Fund and its shareholders.  These Additional Payments, which may be significant, are paid by the Adviser or its affiliates, out of their revenues, which generally come directly or indirectly from fees paid by the entire Fund complex.  Such payments by such parties may create an incentive for these financial institutions such as Brown Advisory Securities, LLC to recommend that you purchase Fund shares.

In return for these Additional Payments, the Adviser expects to receive certain marketing or servicing advantages that are not generally available to mutual funds that do not make such payments.  Such advantages are expected to include, without limitation, placement of the Funds on a list of mutual funds offered as investment options to the selling agent’s clients (sometimes referred to as “Shelf Space”); access to the selling agent’s registered representatives; and/or ability to assist in training and educating the selling agent's registered representatives.

Certain selling or shareholder servicing agents receive these Additional Payments to supplement amounts payable by the Funds under the shareholder servicing plans.  In exchange, these agents provide services including, but not limited to, establishing and maintaining accounts and records; answering inquiries regarding purchases, exchanges and redemptions; processing and verifying purchase, redemption and exchange transactions; furnishing account statements and confirmations of transactions; processing and mailing monthly statements, prospectuses, shareholder reports and other SEC-required communications; and providing the types of services that might typically be provided by each Fund’s Transfer Agent (e.g., the maintenance of omnibus or omnibus-like accounts, the use of the National Securities Clearing Corporation for the transmission of transaction information and the transmission of shareholder mailings).

The Additional Payments may create potential conflicts of interests between an investor and a selling agent who is recommending a particular mutual fund over other mutual funds.  Before investing, you should consult with your financial consultant and review carefully any disclosure by the selling agent as to what monies they receive from mutual fund advisers and distributors, as well as how your financial consultant is compensated.

More information on the FINRA member firms that have received the Additional Payments described in this section is available in the Statement of Additional Information, which is on file with the SEC and is also available on the Funds’ website www.brownadvisoryfunds.com.
 

 

 
Write to us at:
Brown Advisory Funds
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
 
Overnight address:
Brown Advisory Funds
c/o U.S. Bancorp Fund Services, LLC
615 E. Michigan Street, Third Floor
Milwaukee, WI  53202-5207
 
Telephone us at:
(800) 540-6807 (toll free)
 
Visit our Web site at:
www.brownadvisoryfunds.com
 
 
You may purchase shares of a Fund class or sell (redeem) such shares on each weekday that the New York Stock Exchange (“NYSE”) is open.  Under unusual circumstances, a Fund class may accept and process shareholder orders when the NYSE is closed if deemed appropriate.
 
You may purchase shares of a Fund class or sell (redeem) such shares at the NAV of a share of that Fund class next calculated (or minus a redemption/exchange fee in the case of redemptions or exchanges) after the Transfer Agent receives your request in proper form (as described in the section entitled “Your Account – How to Buy Shares” in this prospectus).
 
 
When and How NAV is Determined
 
A Fund’s share price is known as its NAV.  The NAV is determined by dividing the value of a Fund’s securities, cash and other assets, minus all liabilities, by the number of shares outstanding (assets – liabilities / number of shares = NAV).  The NAV takes into account the expenses and fees of a Fund, including management, administration and other fees, which are accrued daily. Due to the fact that different expenses are charged to the Institutional Class, Investor Shares and Advisor Class shares of a Fund, the NAV of the three classes of a Fund may vary.  Each Fund’s share price is calculated as of the close of regular trading (generally 4:00 p.m., Eastern Time) on each day the New York Stock Exchange (“NYSE”) is open for business.

All shareholder transaction orders received in proper form (as described below under “How to Purchase Shares”) by the Transfer Agent, or a Financial Intermediary by 4:00 p.m., Eastern Time will be processed at that day’s NAV.  Transaction orders received after 4:00 p.m., Eastern Time will be priced at the next business day’s NAV.  A Fund’s NAV, however, may be calculated earlier if trading on the NYSE is restricted or as permitted by the SEC.  The Funds do not determine the NAV of their shares on any day when the NYSE is not open for trading, such as weekends and certain national holidays as disclosed in the SAI (even if there is sufficient trading in its portfolio securities on such days to materially affect the NAV per share).  Fair value determinations may be made as described below under procedures as adopted by the Funds’ Board of Trustees.

Fair Value Pricing. Occasionally, reliable market quotations are not readily available or there may be events affecting the value of foreign securities or other securities held by the Funds that occur when regular trading on foreign or other exchanges is closed, but before trading on the NYSE is closed.  Fair value determinations are then made in good faith in accordance with procedures adopted by the Board.  Under the procedures adopted by the Board, the Board may delegate fair value determinations to the Adviser or third-party pricing services, subject to the supervision of the Adviser and the Board. Generally, the fair value of a portfolio security or other asset shall be the amount that the owner of the security or asset might reasonably expect to receive upon its current sale.
 

 
 
Your Account
General Information
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Attempts to determine the fair value of securities introduce an element of subjectivity to the pricing of securities.  As a result, the price of a security determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes.  If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, a Fund would compare the new market quotation to the fair value price to evaluate the effectiveness of its fair valuation determination.  If any significant discrepancies are found, a Fund may adjust its fair valuation procedures.
 
Types of Accounts
 
Type of Account
Requirement
Individual, Sole Proprietorship and Joint Accounts
Individual accounts and sole proprietorship accounts are owned by one person. Joint accounts have two or more owners (tenants).
· Instructions must be signed by all persons required to sign exactly as their names appear on the account
 
· Provide a power of attorney or similar document for each person that is authorized to open or transact business for the account if not a named account owner.
 
Gifts or Transfers to a Minor (UGMA, UTMA)
These custodial accounts provide a way to give money to a child and obtain tax benefits.
 
· Depending on state laws, you can set up a custodial account under the UGMA or the UTMA
 
· The custodian must sign instructions in a manner indicating custodial capacity.
Business Entities
· Provide certified articles of incorporation, a government-issued business license or certificate, partnership agreement or similar   document evidencing the identity and existence of the business entity
 
· Submit a secretary’s (or similar) certificate listing the person(s) authorized to open or transact business for the account.
 
Trusts (including corporate pension plans)
· The trust must be established before an account can be opened
 
· You must supply documentation to substantiate existence of your organization (i.e. Articles of Incorporation/Formation/Organization, Trust Agreements, Partnership Agreement or other official documents).
 
· Remember to include a separate sheet detailing the full name, date of birth, social security number and permanent street address for all authorized individuals.
 
 
Retirement Accounts
 
You may invest in Fund shares through an IRA account sponsored by the Adviser, including traditional and Roth IRAs.  Each Fund may also be appropriate for other retirement plans.  Before investing in any IRA or other retirement plan, you should consult your tax adviser.  Whenever making an investment in an IRA, be sure to indicate the year in which the contribution is made.
 
 
 
 
Your Account
General Information
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Minimum Investments
 
To purchase shares of a Fund, you must make at least the minimum initial investment (or subsequent investment) as shown in the table below.  The minimum investment requirements may be waived from time to time.

Type of Account
Minimum
Initial
Investment
Minimum
Additional
Investment
Institutional Shares
   
– Standard Accounts
 $1,000,000
 $100
Investor Shares
   
– Standard Accounts
 $5,000
 $100
– Traditional and Roth IRA Accounts
 $2,000
 $100
– Accounts with Systematic Investment Plans
 $2,000
 $100
Advisor Shares
   
– Standard Accounts
 $2,000
 $100
– Traditional and Roth IRA Accounts
 $1,000
 N/A
– Accounts with Systematic Investment Plans
 $250
 $100
– Qualified Retirement Plans
 N/A
 N/A

 
 
 
Your Account
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How to Buy Shares
 
This section explains how you can purchase shares of the Brown Advisory Funds.  If you’re opening a new account, an account application is available online at www.brownadvisoryfunds.com or by calling 800-540-6807.  For Fund shares held through brokerage and other types of accounts, please consult your Financial Intermediary.

Buying Shares
Opening an Account
Adding to an Account
Through a Financial Intermediary
Contact your Financial Intermediary
Contact your Financial Intermediary
By Mail (with Check)
· Mail your completed application (along with other required documents) and a check to:
 
Brown Advisory Funds
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
· Write your account number on your check
 
· Send your check with (a) a completed investment slip from a prior statement or confirmation or (b) letter of instruction to:
 
Brown Advisory Funds
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
 
By Wire
· Submit your completed application (and other required documents). An account will be established for you and you will be contacted with the account number.
 
· Instruct your financial institution to wire your money using the instructions in the section entitled “Your Account – How to Buy Shares – Purchase By Wire” in this prospectus.
 
· Call to notify us of your incoming wire
 
· Instruct your financial institution to wire your money using the instructions in the section entitled “Your Account – How to Buy Shares – Purchase By Wire” in this prospectus.
By Telephone
Not accepted for initial purchases
· If you have telephone purchase privileges on the account, you may purchase additional shares in the amount of $100 or more using the bank account on record by calling 800-540-6807.
 
By Internet
· Log onto the Funds’ website at www.brownadvisoryfunds.com
 
· Click on “Open an Account Today”
 
· Be prepared to have the required information to open your new account.
 
· Accept the terms of the online account application.
 
· Complete the online account application.
 
· The Fund will electronically deduct your purchase proceeds from the financial institution you have identified on your account application.
 
· Note – you may be responsible for any unauthorized Internet order as long as the Transfer Agent has taken reasonable measures to verify that the order is genuine.
· Log onto the Funds’ website at www.brownadvisoryfunds.com
 
· Click on “Shareholder Access”
 
· Provide your User ID and password.
 
· Select the Transaction/Purchase menu option.
 
· Follow the instructions provided.
 
 
 
 
Your Account
How to Buy Shares
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Buying Shares
Opening an Account
Adding to an Account
By Automatic Investment Plan
Not accepted for initial purchases
· Complete the Automatic Investment Plan section of the application or submit a letter of instruction if your account was opened without this being done.
 
· Attach a voided check to your application or letter of instruction.
 
· Mail the completed application or letter and voided check.
 
· Your purchase will be electronically debited from the bank account on record as directed in your request.
 
 
General Notes for Buying Shares
 
Unless purchased through a Financial Intermediary, all investments must be made by check, ACH, or wire.  All checks must be payable in U.S. dollars and drawn on U.S. financial institutions.  In the absence of the granting of an exception consistent with the Trust’s anti-money laundering procedures, the Fund does not accept purchases made by credit card check, starter check, third-party check, cash or cash equivalents (for instance, you may not pay by money order, bank draft, cashier’s checks in amounts less than $10,000, or traveler’s check).  The Funds are unable to accept post-dated checks, post-dated on-line bill pay checks, or any conditional order or payment.

·
Checks for all accounts, including individual, sole proprietorship, joint, Uniform Gift to Minors Act (“UGMA”) or Uniform Transfer to Minors Act (“UTMA”) accounts, the check must be made payable to “Brown Advisory Funds.”  A $25 charge may be imposed on any returned payment; you will also be responsible for any losses suffered by the Fund as a result.

·
ACH refers to the “Automated Clearing House” System maintained by the Federal Reserve Bank, which allows banks to process checks, transfer funds and perform other tasks.  Your financial institution may charge you a fee for this service.  A $25 charge may be imposed on any rejected transfers; you will also be responsible for any losses suffered by the Fund as a result.

·
Wires instruct your financial institution with whom you have an account to make a Federal Funds wire payment to us.  Your financial institution may charge you a fee for this service.

Purchase through Financial Intermediaries.  You may buy and sell shares of the Funds through certain financial intermediaries and their agents that have made arrangements with the Funds and are authorized to buy and sell shares of the Funds (collectively, “Financial Intermediaries”).  Your order will be priced at a Fund’s NAV next computed after it is received by a Financial Intermediary.  A Financial Intermediary may hold your shares in an omnibus account in the Financial Intermediary’s name and the Financial Intermediary may maintain your individual ownership records.  The Funds may pay the Financial Intermediary for maintaining individual ownership records as well as providing other shareholder services.  Financial Intermediaries may charge fees for the services they provide to you in connection with processing your transaction order or maintaining your account with them.  Financial Intermediaries are responsible for placing your order correctly and promptly with the Funds, forwarding payment promptly, as well as ensuring that you receive copies of the Funds’ Prospectus.  If you transmit your order with these Financial Intermediaries before the close of regular trading (generally 4:00 p.m., Eastern Time) on a day that the NYSE is open for business, your order will be priced at the Funds’ NAV next computed after it is received by the Financial Intermediary.  Investors should check with their Financial Intermediary to determine if it is subject to these arrangements.
 

 
Your Account
How to Buy Shares
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Purchase by Mail.  Follow the instructions outlined in the table above.  The Funds do not consider the U.S. Postal Service or other independent delivery services to be their agents.  Therefore, deposits in the mail or with such services, or receipt at the Transfer Agent’s post office box of purchase orders or redemption requests, do not constitute receipt by the Transfer Agent.

Purchase by Wire.  If you are making your first investment in one of the Funds, before you wire funds, please contact the Transfer Agent by phone to make arrangements with a telephone service representative to submit your completed account application via mail, overnight delivery or facsimile.  Upon receipt of your completed account application, an account will be established for you and a service representative will contact you within 24 hours to provide you with an account number and wiring instructions.  Once your account has been established, you may instruct your bank to initiate the wire using the instructions you were given.

For either initial or subsequent investments, prior to sending the wire, please call the Transfer Agent at 1-800-540-6807 to advise the Transfer Agent of your wire to ensure proper credit upon receipt.  Your bank must include the name of the Fund, your name and account number so that your wire can be correctly applied.

Instruct your bank to send the wire to:
U.S. Bank, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA #075000022
Credit: U.S. Bancorp Fund Services, LLC
Account #112-952-137
Further Credit: Brown Advisory Funds, [Insert Fund Name and Class]
(Shareholder Name, Shareholder Account #)

Your bank may impose a fee for investments by wire.  Wired funds must be received prior to 4:00 p.m., Eastern Time, to be eligible for same day pricing.  The Funds and the Transfer Agent are not responsible for the consequences of delays resulting from the banking or Federal Reserve wire system or from incomplete wiring instructions.  If you have questions about how to invest by wire, you may call the Funds at 1-800-540-6807.

Purchase by Telephone.  If your account has been open for at least 15 days, and you did not decline telephone privileges on your account application, you may purchase additional shares in the amount of $100 or more from your bank account upon request by telephoning the Transfer Agent toll free at 1-800-540-6807.  You may not make your initial purchase of a Fund’s shares by telephone.  Telephone orders will be accepted via electronic funds transfer from your pre-designated bank account through the Automated Clearing House (“ACH”) network.  You must have banking information established on your account prior to making a purchase.  Only bank accounts held at domestic institutions that are ACH members may be used for telephone transactions.  If your order is received prior to 4:00 p.m. Eastern Time, shares will be purchased at the price next calculated.  For security reasons, requests by telephone may be recorded.
 

 
Your Account
How to Buy Shares
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Purchase by Internet.  You will automatically receive online privileges when you open your account, allowing you to obtain or view your account information, and conduct a number of transactions online, including: buy or sell shares of the Fund; use electronic funds transfer to buy or sell shares of the Fund.

To view your account information or request online transactions, you will first need to register for these services at the shareholder section of our website at www.brownadvisoryfunds.com. You will be asked to accept the terms of an online agreement(s) and establish a password for online services. Using our shareholder website means you are consenting to sending and receiving personal financial information over the Internet, so you should be sure you are comfortable with the associated risks.

As long as we follow reasonable security procedures and act on instructions we reasonably believe are genuine, we will not be responsible for any losses that may occur from unauthorized requests. We will request passwords or other information, and may also record calls. To help safeguard your account, keep your password confidential and verify the accuracy of your confirmation statements immediately after you receive them. Contact us immediately if you believe someone has obtained unauthorized access to your account or password. For transactions done over the Internet, we recommend the use of an Internet browser with 128-bit encryption.  Certain methods of contacting us (such as by Internet) may be unavailable or delayed during periods of unusual market activity.

You can choose not to register for online privileges. If you have online privileges on your account and want to discontinue them, please contact us for instructions. You may reinstate these privileges at any time in writing.

Automatic Investment Plan.  For your convenience, the Funds offer an Automatic Investment Plan (“AIP”).  Under the AIP, after you make your initial investment, you may authorize a Fund to withdraw automatically from your personal checking or savings account an amount that you wish to invest, which must be at least $100 on a monthly or quarterly basis.  If you wish to enroll in the AIP, complete the “Automatic Investment Plan” section in the account application or call the Transfer Agent at 1-800-540-6807 for additional information.  In order to participate in the AIP, your bank or financial institution must be a member of the ACH network.  The Funds may terminate or modify this privilege at any time.  You may terminate your participation in the AIP at any time by notifying the Transfer Agent at least five days prior to the effective date.  A fee ($25) will be charged if your bank does not honor the AIP draft for any reason.

The AIP is a method of using dollar cost averaging as an investment strategy that involves investing a fixed amount of money at regular time intervals.  However, a program of regular investment cannot ensure a profit or protect against a loss as a result of declining markets.  By continually investing the same amount, you will be purchasing more shares when the price is low and fewer shares when the price is high.  Please call 1-800-540-6807 for additional information regarding the Funds’ AIP.
 

 
Your Account
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How to Sell Shares
 
Each Fund processes redemption orders received in good order, promptly.  Under normal circumstances, a Fund class will send redemption proceeds to you within 5 business days.  If a Fund class has not yet collected payment for the shares you are selling, it may delay sending redemption proceeds until it receives payment, which may be up to 15 calendar days.
 
Selling Shares
 
Through a Financial Intermediary
· Contact your Financial Intermediary
By Mail
· Prepare a written request including:
· Your name(s) and signature(s)
· Your account number
· The Fund name and class
· The dollar amount or number of shares you want to sell
· How and where to send the redemption proceeds
· Obtain a signature guarantee (if required) (See the section entitled “Signature Guarantee Requirements below”)
· Obtain other documentation (if required)
· Mail us your request and documentation.
By Wire
· Wire redemptions are only available if you did not decline telephone and Internet options on your account application and you provided a voided check
· Call us with your request (unless you declined telephone and Internet options on your account application) (See the section entitled “By Telephone”) or
· Mail us your request (See the section entitled “By Mail”).
By Telephone
· Call us with your request (unless you declined telephone and Internet options on your account application)
· Provide the following information:
· Your account number
· Exact name(s) in which the account is registered
· Additional form of identification
· Redemption proceeds will be:
· Mailed to you or
· Electronically credited to your account at the financial institution identified on your account application.
By Internet
· Log onto the Funds’ website at www.brownadvisoryfunds.com
· Click on “Shareholder Access”
· Provide your User ID and password.
· Select the Transaction/Redemption menu option.
· Follow the instructions provided.
· Note – you may be responsible for any unauthorized Internet order as long as the Transfer Agent has taken reasonable measures to verify that the order is genuine.
Systematically
· Complete the systematic withdrawal program section of the application
· Attach a voided check to your application
· Mail us your completed application
· Redemption proceeds will be electronically credited to your account at the financial institution identified on your account application or sent by check to your address of record.
 
 
 
 
Your Account
How to Sell Shares
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General Notes for Selling Shares
 
In general, orders to sell or “redeem” shares may be placed either directly with the Funds, the Transfer Agent or with your Financial Intermediary.  You may redeem part or all of a Fund’s shares at the next determined NAV after the Fund receives your order.  You should request your redemption prior to the close of the NYSE, generally 4:00 p.m., Eastern Time, to obtain that day’s closing NAV.  Redemption requests received after the close of the NYSE will be treated as though received on the next business day.

Through a Financial Intermediary.  You may redeem Fund shares through your Financial Intermediary.  Redemptions made through a Financial Intermediary may be subject to procedures established by that institution.  Your Financial Intermediary is responsible for sending your order to the Fund and for crediting your account with the proceeds.  For redemption through Financial Intermediaries, orders will be processed at the NAV per share next effective after receipt of the order by the Financial Intermediary.  Please keep in mind that your Financial Intermediary may charge additional fees for its services.  Investors should check with their Financial Intermediary to determine if it is subject to these arrangements.

By Mail.  You may redeem Fund shares by simply sending a written request to the Transfer Agent.  Please provide the name of the Fund, account number and state the number of shares or dollar amount you would like redeemed.  The letter should be signed by all shareholders whose names appear on the account registration.  Redemption requests will not become effective until all documents have been received in good form by the Fund.  Additional documents are required for certain types of shareholders, such as corporations, partnerships, executors, trustees, administrators, or guardians (i.e., corporate resolutions, or trust documents indicating proper authorization).  Shareholders should contact the Fund for further information concerning documentation required for redemption of Fund shares.

Shareholders who have an IRA or other retirement plan must indicate on their redemption request whether or not to withhold federal income tax.  Redemption requests failing to indicate an election not to have tax withheld will generally be subject to a 10% withholding tax.

Telephone or Wire Redemption.  You may redeem Fund shares by telephone unless you declined telephone privileges on your account application. You may also request telephone privileges after your account is opened by calling the Transfer Agent at 1-800-540-6807 for additional information.  A signature guarantee or a signature verification from a Signature Validation Program member or other acceptable form of authentication from a financial institution source will be required of shareholders in order to qualify for or to change telephone privileges on an existing account.  If you have a retirement account, you may not redeem shares by telephone.  During periods of high market activity, you may encounter higher than usual wait times.  Please allow sufficient time to ensure that you will be able to complete your telephone transaction prior to market close.  If you are unable to contact the Transfer Agent by telephone, you may also mail the requests to the Funds at the address listed under “Contacting the Funds.”  Once a telephone transaction has been placed, it cannot be canceled or modified.

You may redeem Fund shares by calling the Transfer Agent at 1-800-540-6807 prior to the close of trading on the NYSE, generally 4:00 p.m., Eastern Time.  Redemption proceeds will be sent on the next business day to the mailing address that appears on the Fund’s records.  Per your request, redemption proceeds may be wired or may be sent by electronic funds transfer via the ACH network to your pre-designated bank account.  The Transfer Agent will charge a $15 wire fee from your redemption proceeds from any complete share redemption. For partial redemptions, or share specific redemptions, any wire fee will be deducted from your remaining account balance. You will not incur any charge when proceeds are sent via the ACH network; however, most ACH transfers require two days for the bank account to receive credit.  Telephone redemptions cannot be made if you notify the Transfer Agent of a change of address within 30 days before the redemption request.
 

 
 
Your Account
How to Sell Shares
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Prior to executing instructions received to redeem shares by telephone, the Funds will use reasonable procedures to confirm that the telephone instructions are genuine.  If an account has more than one owner or authorized person, the Fund will accept telephone instructions from any one owner or authorized person.  The telephone call may be recorded and the caller may be asked to verify certain personal identification information.  If the Funds or their agents follow these procedures, they cannot be held liable for any loss, expense, or cost arising out of any telephone redemption request that is reasonably believed to be genuine.  This includes any fraudulent or unauthorized request.  The Funds may change, modify or terminate these privileges at any time upon at least a 60-day notice to shareholders.

Systematic Withdrawal Program.  The Funds offer a Systematic Withdrawal Program (“SWP”) whereby shareholders or their representatives may request a redemption in a predetermined amount each month, calendar quarter or annually.  Proceeds can be sent via check to the address on the account or proceeds can be sent by electronic funds transfer via the ACH network to a designated bank account.  To start this program, your account must have Fund shares with a value of at least $2,500, and the minimum amount that may be withdrawn each month, quarter or annually is $50.  This program may be terminated or modified by a shareholder or a Fund at any time without charge or penalty.

A withdrawal under the SWP involves a redemption of Fund shares, and may result in a gain or loss for Federal income tax purposes.  In addition, if the amount withdrawn exceeds the dividends credited to your account, the account ultimately may be depleted.  To establish the SWP, complete the SWP section of the account application.  Please call 1-800-540-6807 for additional information regarding the SWP.
 
 
 
 
Your Account
How to Sell Shares
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You may exchange your Fund shares for the same class of shares of certain other Brown Advisory Funds.  Be sure to confirm with the Transfer Agent that the Fund into which you exchange is available for sale in your state.  The Brown Advisory Growth Equity Fund, Brown Advisory Value Equity Fund, Brown Advisory Flexible Equity Fund, Brown Advisory Small-Cap Growth Fund, Brown Advisory Small-Cap Fundamental Value Fund, Brown Advisory Opportunity Fund, Brown Advisory Maryland Bond Fund, Brown Advisory Intermediate Income Fund, Brown Advisory Equity Income Fund, Brown Advisory Sustainable Growth Fund, Brown Advisory Tax Exempt Bond Fund, Brown Advisory-Somerset Emerging Markets Fund, Brown Advisory-WMC Strategic European Equity Fund,  Brown Advisory Mortgage Securities Fund, Brown Advisory-WMC Japan Alpha Opportunities Fund, Brown Advisory Emerging Markets Small-Cap Fund and Brown Advisory Multi-Strategy Fund are other mutual funds advised by the Adviser that are offered in separate prospectuses.

To obtain the necessary exchange authorization forms, call the Transfer Agent at 1-800-540-6807.  Not all Funds available for exchange may be available for purchase in your state.  Because exchanges are a sale and purchase of shares, they may have tax consequences.

If you exchange Fund shares 14 days or less from the date of purchase, you will be charged a redemption fee of 1.00% of the current NAV of shares redeemed or exchanged, subject to limited exceptions.  Please see the section entitled “Your Account – Account and Transaction Policies – Redemption/Exchange Fee” for additional information.

Requirements.  You may make exchanges only between identically registered accounts (name(s), address, and taxpayer ID number).  There is currently no limit on exchanges, but each Fund reserves the right to limit exchanges (see the section entitled “Tools to Combat Frequent Transaction”).  You may exchange your shares by mail or telephone, unless you declined telephone privileges on your account application.  You may be responsible for any unauthorized telephone order as long as the transfer agent takes reasonable measures to verify that the order is genuine.

Exchanging Shares
 
Through a Financial Intermediary
· Contact your Financial Intermediary
By Mail
· Prepare a written request including:
· Your name(s) and signature(s)
· Your account number
· The names of each fund (and class) you are exchanging
· The dollar amount or number of shares you want to sell (and exchange)
· Open a new account and complete an account application if you are requesting different shareholder privileges
· Mail us your request and documentation.
By Telephone
· Call us with your request (unless you declined telephone and Internet options on your account application)
· Provide the following information:
· Your account number
· Exact name(s) in which account is registered
· Additional form of identification.
 
 

 
 
Your Account
Account and Transaction Policies
client logo
 
 
Redemption/Exchange Fee.  The sale of Fund shares is subject to a redemption fee of 1.00% of the current NAV of shares redeemed or exchanged 14 days or less from the date of purchase.  Each Fund uses the “first in first out” (“FIFO”) method to determine the holding period; this means that if you purchase shares on different days, the shares you held longest will be redeemed first for purposes of determining whether the short-term trading fee applies.  The redemption/exchange fee is charged for the benefit of its long-term shareholders and is deducted from your proceeds and retained by the Fund to help offset transaction costs.  Each Fund reserves the right to waive redemption/exchange fees, withdraw exceptions, or otherwise modify the terms of the redemption/exchange fee at its discretion at any time, to the extent permitted by law.

There are limited exceptions to the imposition of the redemption fee.  The following redemptions are exempt from application of the redemption fee:
 
·
Redemptions in a deceased shareholder account if such an account is registered in the deceased’s name;
 
·
Redemptions in the account of a disabled individual (disability of the shareholder as determined by the Social Security Administration);
 
·
Redemptions of shares purchased through a dividend reinvestment program;
 
·
Redemptions pursuant to the Funds’ systematic programs; or
 
·
Redemptions in qualified retirement plans under Section 401(a) of the Internal Revenue Code (“IRC”), and plans operating consistent with 403(a), 403(b), 408, 408(A), 457, 501(c) and 223(d) of the IRC.

Although the Funds have the goal of applying this redemption/exchange fee to most redemptions of shares held for 14 days or less, the Funds may not always be able to track short-term trading effected through Financial Intermediaries in non-disclosed or omnibus accounts.  While the Funds have entered into information sharing agreements with such Financial Intermediaries as described under “Tools to Combat Frequent Transactions” which contractually require such Financial Intermediaries to provide the Funds with information relating to its customers investing in a Fund through non-disclosed or omnibus accounts, the Funds cannot guarantee the accuracy of the information provided to them from Financial Intermediaries and may not always be able to track short-term trading effected through these Financial Intermediaries.  In addition, because the Funds are required to rely on information provided by the Financial Intermediary as to the applicable redemption/exchange fee, the Funds cannot ensure that the Financial Intermediary is always imposing such fee on the underlying shareholder in accordance with the Funds’ policies.

Tools to Combat Frequent Transactions.  The Funds are intended for long-term investors and do not accommodate frequent transactions.  Short-term “market-timers” who engage in frequent purchases and redemptions can disrupt a Fund’s investment program and create additional transaction costs that are borne by all of a Fund’s shareholders.  The Board has adopted policies and procedures that are designed to discourage excessive, short-term trading and other abusive trading practices that may disrupt portfolio management strategies and harm performance.  In addition, the Funds discourage excessive, short-term trading and other abusive trading practices and the Funds may use a variety of techniques to monitor trading activity and detect abusive trading practices.  These steps may include, among other things, the imposition of redemption fees, if necessary, monitoring trading activity, or using fair value pricing when appropriate, under procedures as adopted by the Board when the Adviser, Somerset, or Wellington Management, subject to the Adviser’s approval, determines current market prices are not readily available.  As approved by the Board, these techniques may change from time to time as determined by the Funds in their sole discretion.
 

 
 
Your Account
Account and Transaction Policies
client logo
 
In an effort to discourage abusive trading practices and minimize harm to a Fund and its shareholders, the Funds reserve the right, in their sole discretion, to reject any purchase order, in whole or in part, for any reason (including, without limitation, purchases by persons whose trading activity in Fund shares is believed by the Adviser to be harmful to the Funds) and without prior notice.  The Funds may decide to restrict purchase and sale activity in its shares based on various factors, including whether frequent purchase and sale activity will disrupt portfolio management strategies and adversely affect a Fund’s performance.  Although these efforts are designed to discourage abusive trading practices, these tools cannot eliminate the possibility that such activity will occur.  The Funds seek to exercise their judgment in implementing these tools to the best of its ability in a manner that it believes is consistent with shareholder interests.  Except as noted in the Prospectus, the Funds apply all restrictions uniformly in all applicable cases.

Due to the complexity and subjectivity involved in identifying abusive trading activity and the volume of shareholder transactions the Funds handle, there can be no assurance that the Funds’ efforts will identify all trades or trading practices that may be considered abusive.  In particular, since the Funds receive purchase and sale orders through Financial Intermediaries that use group or omnibus accounts, the Funds cannot always detect frequent trading.  However, the Funds will work with Financial Intermediaries as necessary to discourage shareholders from engaging in abusive trading practices and to impose restrictions on excessive trades. In this regard, the Funds have entered into information sharing agreements with Financial Intermediaries pursuant to which these intermediaries are required to provide to the Funds, at the Funds’ request, certain information relating to their customers investing in the Funds through non-disclosed or omnibus accounts.  The Funds will use this information to attempt to identify abusive trading practices.  Financial Intermediaries are contractually required to follow any instructions from the Funds to restrict or prohibit future purchases from shareholders that are found to have engaged in abusive trading in violation of the Funds’ policies.  However, the Funds cannot guarantee the accuracy of the information provided to them from Financial Intermediaries and cannot ensure that they will always be able to detect abusive trading practices that occur through non-disclosed and omnibus accounts.  As a consequence, the Funds’ ability to monitor and discourage abusive trading practices in omnibus accounts may be limited.

Proceeds.  Proceeds will generally be sent no later than seven calendar days after a Fund receives your redemption request.  If elected on your account application, you may have the proceeds of the redemption request sent by check to your address of record, by wire to a pre-determined bank, or by electronic funds transfer via the ACH network to the bank account designated by you on your fund account application.  When proceeds are sent via the ACH network, the funds are usually available in your bank account in 2-3 business days.

Check Clearance.  The proceeds from a redemption request may be delayed up to 15 calendar days from the date of the receipt of a purchase check until the check clears.  If the check does not clear, you will be responsible for any losses suffered by the relevant Fund as well as a $25 service charge imposed by the Transfer Agent.  This delay can be avoided by purchasing shares by wire.

Suspension of Redemptions.  We may temporarily suspend the right of redemption or postpone payments under certain emergency circumstances or when the SEC orders a suspension.
 
 
 
 
Your Account
Account and Transaction Policies
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Signature Guarantees.  The Transfer Agent may require a signature guarantee for certain redemption requests.  A signature guarantee assures that your signature is genuine and protects you from unauthorized account redemptions.  A signature guarantee of each owner is required in the following situations:
 
·
If a change of address request has been received by the Transfer Agent within the last 30 days;
 
·
When requesting a change in ownership on your account; and
 
·
When redemption proceeds are payable or sent to any person, address or bank account not on record.

In addition to the situations described above, a Fund and/or the Transfer Agent may require a signature guarantee in other instances based on the circumstances relative to the particular situation.  Non-financial transactions including establishing or modifying certain services on an account may require a signature guarantee, signature verification from a Signature Validation Program member, or other acceptable form of authentication from a financial institution source.  Signature guarantees will generally be accepted from domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations, as well as from participants in the New York Stock Exchange Medallion Signature Program and the Securities Transfer Agents Medallion Program (“STAMP”).  A notary public is not an acceptable signature guarantor.

Customer Identification Program.  Please note that, in compliance with the USA PATRIOT Act of 2001, the Transfer Agent will verify certain information on your account application as part of the Funds’ Anti-Money Laundering Program.  As requested on the account application, you should supply your full name, date of birth, social security number and permanent street address.  Mailing addresses containing only a P.O. Box will not be accepted.  If you do not supply the necessary information, the Transfer Agent may not be able to open your account.  Please contact the Transfer Agent at 1-800-540-6807 if you need additional assistance when completing your application.  If the Transfer Agent is unable to verify your identity or that of another person authorized to act on your behalf, or if it believes it has identified potentially criminal activity, each Fund reserves the right to temporarily limit additional share purchases, close your account or take any other action they deem reasonable or required by law.  The Trust has appointed an Anti-Money Laundering Officer to oversee the operation of and compliance with the Trust’s Anti-Money Laundering Program.

No Certificates.  The Funds do not issue share certificates.

Right to Reject Purchases.  Each Fund reserves the right to reject or cancel within one business day, without any prior notice, any purchase order, including transactions that, in the judgment of the Adviser or Sub-Adviser, represent excessive trading, may be disruptive to the management of a Fund’s portfolio, may increase a Fund’s transaction costs, administrative costs or taxes, and those that may otherwise be detrimental to the interests of the Funds and their shareholders. The purpose of such action is to limit increased Fund expenses incurred when certain investors buy and sell shares of a Fund for the short-term when the markets are highly volatile. Each Fund’s right to cancel or revoke such purchase orders would be limited to within one business day following receipt by the Fund of such purchase orders.

Redemption In-Kind.  Each Fund generally pays redemption proceeds in cash. However, the Funds reserve the right to pay redemption proceeds to you by a distribution of liquid securities from a Fund’s portfolio (a “redemption in-kind”).  It is not expected that a Fund would do so except during unusual market conditions.  If a Fund pays your redemption proceeds by a distribution of liquid securities, you could incur brokerage or other charges in subsequently converting the securities to cash and will bear any market risks associated with such securities until they are converted into cash.  A redemption in-kind is treated as a taxable transaction and a sale of the redeemed shares, generally resulting in capital gain or loss to you, subject to certain loss limitation rules.
 

 
 
Your Account
Account and Transaction Policies
client logo
 
Small Accounts.  To reduce our expenses, if the value of your account falls below $1,000 (excluding Qualified Retirement Accounts) with respect to Institutional Shares, or $500 (excluding Qualified Retirement Accounts) with respect to Advisor Shares and Investor Shares, the Fund may ask you to increase your balance.  If after 60 days, the account value is still below $1,000 (excluding Qualified Retirement Accounts) for Institutional Shares, or $500 (excluding Qualified Retirement Accounts) for Advisor Shares and Investor Shares, the applicable Fund may close your account and send you the proceeds.  The Fund will not close your account if it falls below these amounts solely as a result of a reduction in your account’s market value.  There are no minimum balance requirements for Qualified Retirement Accounts.

Internet Transactions.  You may open a Fund account as well as purchase or sell Fund shares online at www.brownadvisoryfunds.com.  Establishing an account online is permitted only for individual, IRA, joint and UGMA/UTMA accounts. If you conduct transactions or open an account online, you are consenting to sending and receiving personal financial information over the Internet.

Electronic Delivery.  Consistent with the Fund’s commitment to environmental sustainability, you may sign up to receive quarterly shareholder statements and tax statements electronically on www.brownadvisoryfunds.com.  You may change your delivery preference and resume receiving these documents through the mail at any time by updating your electronic delivery preferences on www.brownadvisoryfunds.com or contacting the Funds at 1-800-540-6807.

Householding.  In an effort to decrease costs, the Funds will reduce the number of duplicate Prospectuses and annual and semi-annual reports that you receive by sending only one copy of each to those addresses shown by two or more accounts.  Please call the Transfer Agent toll free at 1-800-540-6807 to request individual copies of these documents.  The Funds will begin sending individual copies 30 days after receiving your request.  This policy does not apply to account statements.

Confirmations.  If you purchase shares directly from any Fund, you will receive monthly statements detailing Fund balances and all transactions completed during the prior month and a confirmation of each transaction.  Automatic reinvestments of distributions and systematic investments/withdrawals may be confirmed only by monthly statement.  You should verify the accuracy of all transactions in your account as soon as you receive your confirmations and monthly statements.

Portfolio Holdings.  A description of each Fund’s policies and procedures with respect to the disclosure of portfolio securities is available in the Funds’ SAI.

Policy on Foreign Shareholders.  Shares of the Fund have not been registered for sale outside of the United States.  Accordingly, the Fund generally requires that all shareholders must be U.S. persons with a valid U.S. taxpayer identification number to open an account with the Fund.  The Fund generally does not sell shares to investors residing outside the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses, investors who are clients of the Adviser or its affiliates, or other investors meeting eligibility requirements as determined by the Adviser.  The Fund reserves the right to close the account within 5 business days if clarifying information or documentation is not received.

Canceled or Failed Payments.  Each Fund accepts checks and ACH transfers at full value subject to collection.  If a Fund does not receive your payment for shares or you pay with a check or ACH transfer that does not clear, your purchase will be canceled within 2 business days of bank notification.  You will be responsible for any actual losses or expenses incurred by a Fund or the Transfer Agent as a result of the cancellation, and the Fund may redeem shares you own in the account (or another identically registered account that you maintain with the Transfer Agent) as reimbursement.  Each Fund and its agents have the right to reject or cancel any purchase or exchange (purchase side only) due to nonpayment.
 
 

 
Your Account
Account and Transaction Policies
client logo
 
Lost Accounts.  The Transfer Agent may consider your account “lost” if correspondence to your address of record is returned as undeliverable on two consecutive occasions, unless the Transfer Agent receives your new address.  In addition, the amount of any outstanding cash distribution checks (unpaid for six months or more) or checks that have been returned to the Transfer Agent will be reinvested at the then-current NAV and the checks will be canceled. However, checks will not be reinvested into accounts with a zero balance.

Unclaimed Property.  Your mutual fund account may be transferred to your state of residence if no activity occurs within your account during the “inactivity period” specified in your state’s abandoned property laws.
 
 
 
 

 
The Brown Advisory Total Return Fund declares distributions from net investment income at least monthly and the Brown Advisory Strategic Bond Fund declares distributions from net investment income at least quarterly.  Any net capital gain realized by a Fund will be distributed at least annually.  A Fund may make an additional payment of dividends or distributions if it deems it desirable at other times during any year.

All distributions of each Fund are reinvested in additional shares, unless you choose one of the following options:

(1) receive dividends in cash, while reinvesting capital gain distributions in additional Fund shares;
 
(2) receive all distributions in cash; or
 
(3) reinvest dividends in additional Fund shares while receiving capital gain distributions in cash.

You may change your dividend and capital gain distribution election in writing or by calling the Transfer Agent in advance of the next distribution.

For Federal income tax purposes, distributions are treated the same whether they are received in cash or reinvested.  Shares become entitled to receive distributions on the day after the shares are issued.

If an investor elects to receive distributions in cash and the U.S. Postal Service cannot deliver your check, or if a check remains uncashed for six months, the Funds reserve the right to reinvest the distribution check in the shareholder’s account at the Fund’s then current NAV and to reinvest all subsequent distributions.
 
 
Each Fund intends to elect and continue to qualify to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).  As a regulated investment company, each Fund generally will not be subject to federal income tax if it distributes its income as required by the tax law and satisfies certain other requirements that are described in the SAI.

Each Fund generally intends to operate in a manner such that it will not be liable for Federal income or excise taxes.

You will generally be taxed on a Fund’s taxable distributions, regardless of whether you reinvest them or receive them in cash.  A Fund’s taxable distributions of net investment income (including short-term capital gains) are taxable to you as ordinary income.  The Fund’s distributions of long-term capital gains, if any, are taxable to you as long-term capital gains, regardless of how long you have held your shares.  Distributions may also be subject to certain state and local taxes.  Some Fund distributions may also include nontaxable returns of capital. Return of capital distributions reduce your tax basis in your Fund shares and are treated as gain from the sale of the shares to the extent your basis would be reduced below zero.

The maximum tax rate for individual taxpayers applicable to long-term capital gains and income from certain qualifying dividends on certain corporate stock is generally either 15% or 20%, depending on whether the individual’s income exceeds certain threshold amounts.  A shareholder will also have to satisfy a more than 60-day holding period for the Fund shares with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower tax rates.  These rate reductions do not apply to corporate taxpayers.
 

 
 

A 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Funds and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceeds certain threshold amounts.

Distributions of capital gain and distributions of net investment income reduce the NAV of a Fund’s shares by the amount of the distribution. If you purchase shares prior to these distributions, you are taxed on the distributions even though the distributions represent a return of your investment.

The sale or exchange of Fund shares is a taxable transaction for Federal income tax purposes.  You will recognize a gain or loss on such transactions equal to the difference, if any, between the amount of your net sales proceeds and your tax basis in the Fund shares.  Such gain or loss will be capital gain or loss if you held your Fund shares as capital assets.  Any capital gain or loss will generally be treated as long-term capital gain or loss if you held the Fund shares for more than one year at the time of the sale or exchange, and otherwise as short-term capital gain.

Investment income received by the Funds from sources within foreign countries may be subject to foreign income taxes withheld at the source. If more than 50% of the value of a Fund’s total assets at the close of its taxable year consists of securities of foreign corporations, the Fund will be eligible and may elect to treat a proportionate amount of such foreign taxes paid by it as additional income to each shareholder which would generally permit each shareholder (1) to credit this amount (subject to applicable limitations) or (2) to deduct this amount for purposes of computing its Federal income tax liability.  The Funds will notify you if they make this election.
 
Dividends paid by a Fund will not qualify as “exempt-interest dividends,” and will not be excludable from gross income by its shareholders, because the Funds will no invest at least 50% of the value of its total assets in securities the interest on which is excludable from gross income.

A Fund may be required to withhold Federal income tax at the Federal backup withholding rate on all taxable distributions and redemption proceeds otherwise payable to you if you fail to provide the Fund with your correct taxpayer identification number or to make required certifications, or if you have been notified by the IRS that you are subject to backup withholding.  Backup withholding is not an additional tax. Rather, any amounts withheld may be credited against your Federal income tax liability, so long as you provide the required information or certification.  Investment income received by a Fund from sources within foreign countries may be subject to foreign income taxes withheld at the source.

After December 31 of each year, a Fund will mail you reports containing information about the income tax classification of distributions paid during the year.
 

 

 
The financial highlights tables are intended to help you understand the financial performance of the Brown Advisory Strategic Bond Fund for the period since the inception of the Fund on September 30, 2011.  The financial information presented for each applicable period prior to October 19, 2012 is that of the Predecessor Fund.  The Brown Advisory Strategic Bond Fund is the accounting successor to the Predecessor Fund as a result of the reorganization of the Predecessor Fund into the Brown Advisory Strategic Bond Fund (then the Brown Advisory Tactical Bond Fund) on October 19, 2012.  The Brown Advisory Strategic Bond Fund has adopted the Financial Statements of the Predecessor Fund.  Certain information reflects financial results for a single Fund share.  The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. The information presented in the tables below has been audited by[                                     ], an independent registered public accounting firm, whose report, along with the Fund’s financial statements, are included in the annual report, which is available upon request.  The financial highlights tables on the following page reflect selected per share data and ratios for a share outstanding of the Fund throughout each period.
 
 
No financial highlights are presented for the Brown Advisory Total Return Fund as that Fund had not commenced operations during the fiscal year ended June 30, 2014.
 
 
 
Brown Advisory Strategic Bond Fund
                 
                   
Advisor Shares
                 
    Year/Period Ended:  
   
June 30,
2014
   
June 30,
2013
   
June 30,
2012(f)
 
                   
Net Asset Value, Beginning of Year/Period
  $ 9.68     $ 9.68     $ 10.00  
                         
Net Investment Gains/(Losses)(a)
   
[         ]
      (0.09 )     (0.04 )
Net Realized and Unrealized Gains/(Losses)
   
[         ]
      0.29       (0.27 )
                         
Total from Investment Operations
  $
[         ]
    $ 0.20     $ (0.31 )
                         
Distributions:
                       
from Net Investment Income
   
[         ]
      (0.20 )     (0.01 )
                         
Total Distributions to Shareholders
  $
[         ]
    $ (0.20 )   $ (0.01 )
                         
Redemption fees
   
[         ]
      (e)     (e)
                         
Net Asset Value, End of Year/Period
  $
[         ]
    $ 9.68     $ 9.68  
                         
Total Return
   
[         ]
%     2.09 %     (3.09 )%(b)
                         
Net Assets at End of Year/Period (000’s Omitted)
  $
[         ]
    $ 25,570     $ 29,541  
                         
Ratios to Average Net Assets:
                       
Net Investment Income/Loss
   
[         ]
%     (0.87 )%     (0.56 )%(c)
Net Expenses
   
[         ]
%     1.40 %     1.40 %(c)
Gross Expenses(d)
   
[         ]
%     1.40 %     1.40 %(c)
                         
Portfolio Turnover Rate
   
[         ]
%     992 %     1,290 %(b)

(a)  
Calculated based on average shares outstanding during the year/period.
(b)  
Not annualized.
(c)  
Annualized.
(d)  
Reflects the expense ratio excluding any waivers and/or expense reimbursements.
(e)  
Less than $0.01 per share.
(f)  
Commenced operations on September 30, 2011.  The information presented is for the period from September 30, 2011 to June 30, 2012.

 
 
 
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FOR MORE INFORMATION
 
Annual/Semi-Annual Reports
Additional information about the Brown Advisory Strategic Bond Fund’s investments is available in the Fund’s annual/semi-annual reports to shareholders.  As of the date of this Prospectus, annual and semi-annual reports for the Brown Advisory Total Return Fund are not yet available as this Fund had not commenced operations prior to the date of this Prospectus.  In each Fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year.
 
The annual and semi-annual reports provide (or will provide) additional information about each Fund’s investments, as well as the most recent financial reports and portfolio listings. 

Statement of Additional Information (“SAI”)
The SAI provides more detailed information about each Fund and is incorporated by reference into, and is legally part of, this Prospectus.

Contacting the Funds
You can get free copies of the Prospectus, SAI and annual/semi-annual reports or other information by visiting the Funds’ website at www.brownadvisoryfunds.com or by contacting the Funds at:

Brown Advisory Funds
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
800-540-6807 (toll free)

Securities and Exchange Commission Information
You can also review each Fund’s annual/semi-annual reports, the SAI and other information about the Funds at the Public Reference Room of the Securities and Exchange Commission (“SEC”). The scheduled hours of operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090. You can get copies of this information, for a fee, by visiting the SEC’s website www.sec.gov or e-mailing or writing to:

Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549
E-mail address: publicinfo@sec.gov

Distributor
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, WI 53202-5207  Investment Company Act File No. 811-22708
 
 
 
 
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BROWN ADVISORY TOTAL RETURN FUND
Institutional Shares (BXXXX)
Investor Shares (BXXXX)
Advisor Shares (BXXXX)
 
BROWN ADVISORY STRATEGIC BOND FUND
(formerly, Brown Advisory Tactical Bond Fund)
Institutional Shares (Not Available for Sale)
Investor Shares (Not Available for Sale)
Advisor Shares (BATBX)
 

 
Subject to Completion—Dated August 15, 2014
 
 
The information in this Prospectus is not complete and may be changed.  We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective.  This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 


BROWN ADVISORY MULTI-STRATEGY FUND
 
Prospectus
October 31, 2014
client logo


Institutional Shares (BXXXX)
Investor Shares (BXXXX)
Advisor Shares (BXXXX)



The Securities and Exchange Commission has not approved or disapproved the Fund’s shares or determined whether this Prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.
 

 
 
 

 

 
 
 
 client logo
 
Summary Section
This important section summarizes the Funds’ objectives, strategies, fees, risks, past performance, portfolio turnover, portfolio manager, your account and other information.
 
Additional Information About the Fund's Principal Investment Strategies
This section provides details about the Funds’ investment strategies.
 
Table of Investment Terms
 
Principal Investment Risks
This section provides details about the Funds’ principal investment risks.
 
Management
Review this section for information about Brown Advisory, LLC (the “Adviser”), and the people who manage the Funds.
 
Choosing a Share Class
This section explains the differences between each class of shares and the applicable fees and sales charges.
 
Your Account
This section explains how shares are valued and how you can purchase and sell Fund Shares.
 
Distributions and Taxes
This section provides details about dividends, distributions and taxes.
 
Financial Highlights
Review this section for details on selected financial statements of the Fund.
   
1
       
   
8
       
   
10
       
   
13
       
   
23
   
23
   
24
   
24
 
Fund Expenses                         
 
24
       
  Choosing a Share Class   25
  Class Comparison    25
  Rule 12b-1 Distribution Fees    26
  Shareholder Service Fees    26
  Additional Payments to Dealers    26
       
  Your Account    28
  How to Buy Shares    31
  How to Sell Shares    35
  Exchange Privileges    38
  Account and Transaction Policies   39
       
  Distributions and Taxes    43
  Distributions   43
  Taxes   43
       
  Financial Highlights    45
 

 
Summary Section
Brown Advisory  Multi-Strategy Fund
 client logo
 
Summary Section
 
Brown Advisory Multi-Strategy Fund
 
Institutional Shares (Ticker: BXXXX)
Investor Shares (Ticker: BXXXX)
Advisor Shares (Ticker: BXXXX)
 
Investment Objective
 
The Brown Advisory Multi-Strategy Fund (the “Fund”) seeks to achieve long-term capital appreciation and current income.
 
Fees and Expenses
 
The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
 
Shareholder Fees
(fees paid directly from your investment)
 
Institutional
Shares
 
Investor
Shares
 
Advisor
Shares
Maximum Sales Charge (Load) imposed on Purchases (as a % of the offering price)
 
None
 
None
 
None
Maximum Deferred Sales Charge (Load) imposed on Redemptions (as a % of the sale price)
 
None
 
None
 
None
Redemption Fee (as a % of amount redeemed on shares held for 14 days or less)
 
1.00%
 
1.00%
 
1.00%
Exchange Fee (as a % of amount exchanged on shares held for 14 days or less)
 
1.00%
 
1.00%
 
1.00%
             
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
           
Management Fees
 
0.30%
 
0.30%
 
0.30%
Distribution (12b-1) Fees
 
None
 
None
 
0.25%
Shareholder Servicing Fees
 
None
 
0.15%
 
0.15%
Other Expenses(1)
 
0.61%
 
0.61%
 
0.61%
Acquired Fund Fees and Expenses (2)
 
0.89%
 
0.89%
 
0.89%
Total Annual Fund Operating Expenses
 
 1.80%
 
1.95%
 
2.20%
Fee Waiver and/or Expense Reimbursement
 
[     ]%
 
[     ]%
 
[      ]%
Total Annual Fund Operating Expenses After Fee Waiver(3)
 
[     ]%
 
[     ]%
 
[      ]%
 
(1)  
“Other Expenses” are based on estimated amounts for the current fiscal year.
 
(2)  
“Acquired Fund Fees and Expenses” are indirect fees and expenses that the Fund incurs from investing in the shares of other mutual funds, including money market funds and exchange traded funds, and they are based on estimated amounts for the current fiscal year.
 
(3)  
The Adviser has contractually agreed to waive its fees and/or reimburse certain expenses (exclusive of any front-end or contingent deferred sales loads, taxes, interest, brokerage commissions, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization and extraordinary expenses) in order to limit the Total Annual Fund Operating Expenses after Fee Waiver and/or Expense Reimbursement for Institutional Shares, Investor Shares and Advisor Shares to [      ]%, [      ]% and [      ]%, respectively, of the Fund’s average daily net assets through October 31, 2016. The Fund may have Total Annual Fund Operating Expenses after Fee Waiver and/or Expense Reimbursement higher than these expense caps as a result of any acquired fund fees and expenses or other expenses that are excluded from the calculation. The contractual waivers and expense reimbursements may be changed or eliminated at any time by the Board of Trustees, on behalf of the Fund, upon 60 days written notice to the Adviser. The contractual waivers and expense reimbursements may not be terminated by the Adviser without the consent of the Board of Trustees. The Adviser may recoup any waived amount from the Fund pursuant to this agreement if such reimbursement does not cause the Fund to exceed existing expense limitations and the reimbursement is made within three years after the year in which the Adviser incurred the expense.
 
 
 
 
Summary Section
Brown Advisory  Multi-Strategy Fund
 client logo
 
Example
 
The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.  This example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of each period.  The example also assumes that your investment has a 5% annual return each year and that the Fund’s operating expenses remain the same (taking into account the contractual expense limitation).  Although your actual costs may be higher or lower, based on these assumptions your costs would be:
 
 
1 Year
3 Years
Institutional Shares
[      ]
[      ]
Investor Shares
[      ]
[      ]
Advisor Shares
[      ]
[      ]
 
Portfolio Turnover
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio).  A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account.  These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance.  No portfolio turnover rate is provided for the Fund because the Fund has not completed its first fiscal year as of the date of this Prospectus.
 
Principal Investment Strategies
 
The Brown Advisory Multi-Strategy Fund is a “fund of funds,” meaning that under normal conditions, the Fund seeks to achieve its investment objective by investing primarily in other Brown Advisory Funds and unaffiliated investment companies, including exchange-traded funds (“ETFs”) (the “Underlying Funds”), in accordance with its target portfolio allocation.  Different Underlying Funds in which the Fund invests may invest their assets in different segments of the equity or fixed income markets in accordance with their own investment objectives and policies.  The Fund seeks to achieve its investment objective by normally investing: (1) approximately 60% (within a range of 50% to 70%) of its assets in Underlying Funds that invest in equity securities; and (2) approximately 40% (within a range of 30% to 50%) of its assets in Underlying Funds that invest in fixed income securities and cash and cash equivalents.  This target allocation is designed to provide Fund investors with opportunities for capital appreciation associated with investing in equities, as well as income opportunities associated with investing in fixed income securities.
 
Within the equity allocation, the Underlying Funds may invest in U.S. and international (including emerging markets) stocks, small-cap, mid-cap, and large-cap stocks, and growth and value stocks.  Within the fixed income allocation, the Underlying Funds may invest in short- and long-term bonds, municipal bonds, and mortgage- and asset-backed securities.
 
The Underlying Funds may utilize options, futures contracts, currency forwards, swaps and options on futures. These investments will typically be made for investment purposes consistent with the Underlying Funds’ investment objective and may also be used to mitigate or hedge risks within the portfolio or for the temporary investment of cash balances.  The Underlying Funds may also opportunistically reduce equity exposure using futures contracts.  In addition, the Underlying Funds may invest in participatory notes which are instruments that are used to replicate the performance of certain underlying issuers and markets. By investing in derivatives, the Underlying Funds attempt to achieve the economic equivalence it would achieve if it were to invest directly in the underlying security.
 
 
 
 
Summary Section
Brown Advisory  Multi-Strategy Fund
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In selecting Underlying Funds, the Adviser first determines the Fund’s target portfolio allocation within the percentage ranges stated above.  The Adviser then selects individual Underlying Funds within the target portfolio allocation based on various factors, including, among others, past performance and portfolio characteristics (e.g., style, portfolio holdings, credit quality and duration).  The Adviser may sell an Underlying Fund for a variety of reasons, such as to secure gains, limit losses or allocate assets to a different Underlying Fund.
 
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 strategies and invest, without limitation, in cash or prime quality cash equivalents.  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 Risks of the Fund and the Underlying Funds
 
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.  The following are the principal risks that could affect the value of your investment:
 
·  
ADR and GDR 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.
 
·  
Convertible Securities Risk. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities.
 
·  
Credit Risk. The value of your investment in the Fund may change in response to changes in the credit ratings of an Underlying Fund’s portfolio securities. Generally, investment risk and price volatility increase as a security’s credit rating declines.
 
·  
Debt/Fixed Income Securities Risk. An increase in interest rates typically causes a fall in the value of the debt securities in which the Underlying Funds may invest.  The value of your investment may change in response to changes in the credit ratings of an Underlying Fund’s portfolio of debt securities.  Securities rated below investment grade (“junk bonds”) are subject to greater risk of loss of your money than higher rated securities. Issuers may (increase) decrease prepayments of principal when interest rates (fall) increase, affecting the maturity of the debt security and causing the value of the security to decline.
 
·  
Derivatives Risk.  The risks of investments by the Underlying Funds in options, swaps, 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.
 
 
 
 
Summary Section
Brown Advisory  Multi-Strategy Fund
 client logo
 
·  
Equity and General Market Risk.  Common stocks are susceptible to general stock market fluctuations and to volatile increases and decreases in value.  The stock market may experience declines or stocks in an Underlying Fund’s portfolio may not increase their earnings at the rate anticipated.  The Fund’s NAV and investment return will fluctuate based upon changes in the value of its portfolio securities.
 
·  
ETF Risk. ETFs may trade at a discount to the aggregate value of the underlying securities and frequent trading of ETFs by the Fund can generate brokerage expenses.  Shareholders of the Fund will indirectly be subject to the fees and expenses of the individual ETFs in which the Fund or the Underlying Funds invest and 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.
 
·  
European Securities Risk: Investments in European securities can be expected to be impacted by the political, social and economic environment within Europe.  As such, the performance of an Underlying Fund investing primarily in European securities may be more volatile than the performance of other funds that are more geographically diverse.
 
·  
Foreign Securities/Emerging Markets Risk.  Certain of the Underlying Funds may invest in foreign securities, including emerging markets securities, and are subject to risks associated with foreign markets, such as adverse political, social and economic developments, accounting standards or governmental supervision that is not consistent with that to which U.S. companies are subject, limited information about foreign companies, less liquidity in foreign markets and less protection to the shareholders in foreign markets.
 
·  
Growth Company Risk. Securities of growth companies can be more sensitive to the company’s earnings and more volatile than the market in general.
 
·  
Inflation-Indexed Securities Risk.  The risk that the Consumer Price Index moves in a manner that is adverse to an Underlying Fund’s positions in Treasury Inflation Protected Securities (“TIPS”).
 
·  
Interest Rate Risk. An increase in interest rates typically causes a fall in the value of the fixed income securities in which the Underlying Funds may invest.
 
·  
Investments in Other Investment Companies Risk.  Shareholders of the Fund will indirectly be subject to the fees and expenses of the other investment companies in which the Fund or the Underlying Funds invest and 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. In addition, shareholders will be exposed to the investment risks associated with investments in the other investment companies.
 
·  
Liquidity Risk.  Certain securities held by an Underlying Fund may be difficult (or impossible) to sell at the time and at the price the Underlying Fund would like. As a result, the Underlying Fund may have to hold these securities longer than it would like and may forego other investment opportunities. There is the possibility that an Underlying 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 may not meet its investment objective based on the Adviser’s success or failure to implement investment strategies for the Fund.
 
·  
Municipal Securities Risk. Adverse economic or political factors in the municipal bond market, including changes in the tax law, could impact in a negative manner those Underlying Funds that invest primarily in municipal securities.
 
 
 
 
Summary Section
Brown Advisory  Multi-Strategy Fund
 client logo
 
·  
Mortgage-Related and Asset-Backed Securities Risk. Mortgage-related securities are subject to prepayment risk as well as the risks associated with investing in debt securities in general. If interest rates fall and the loans underlying these securities are prepaid faster than expected, an Underlying Fund may have to reinvest the prepaid principal in lower yielding securities, thus reducing the Underlying Fund's income. Conversely, if interest rates increase and the loans underlying the securities are prepaid more slowly than expected, the expected duration of the securities may be extended, reducing the cash flow for potential reinvestment in higher yielding securities.
 
·  
New Fund Risk:  The Fund is new with no operating history and there can be no assurance that the Fund will grow to or maintain an economically viable size.
 
·  
Non-Investment Grade Securities Risk. Below investment grade debt securities (also known as "junk bonds") are speculative and involve a greater risk of default and price change due to changes in the issuer's creditworthiness. The market prices of these debt securities may fluctuate more than the market prices of investment grade debt securities and may decline significantly in periods of general economic difficulty.
 
·  
Portfolio Turnover Risk. High portfolio turnover involves correspondingly greater expenses to an Underlying Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities.
 
·  
Prepayment/Extension Risk. 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 an Underlying Fund to invest in securities with lower interest rates, and reduce the Underlying 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.
 
·  
Private Placement Risk. Certain Underlying Funds 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 Securities Act of 1933, as amended (the “1933 Act”). Privately issued securities are restricted securities that are not publicly traded.  Delay or difficulty in selling such securities may result in a loss to an Underlying Fund.
 
·  
Rating Agencies Risk.  Ratings are not an absolute standard of quality, but rather general indicators that reflect only the view of the originating rating agencies from which an explanation of the significance of such ratings may be obtained. There is no assurance that a particular rating will continue for any given period of time or that any such rating will not be revised downward or withdrawn entirely if, in the judgment of the agency establishing the rating, circumstances so warrant. A downward revision or withdrawal of such ratings, or either of them, may have an effect on the liquidity or market price of the securities in which an Underlying Fund invests. The ratings of securitized assets may not adequately reflect the credit risk of those assets due to their structure.
 
·  
REIT and Real Estate Risk.  The value of an Underlying Fund’s investments in real estate investment trusts (“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.
 
·  
Smaller and Medium Capitalization Company Risk.  Securities of smaller and medium-sized companies held by an Underlying Fund may be more volatile and more difficult to liquidate during market down turns than securities of larger companies.  Additionally the price of smaller companies may decline more in response to selling pressures.
 
·  
U.S. Government Securities Risk. Although U.S. Government securities are generally 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.
 
 
 
 
Summary Section
Brown Advisory  Multi-Strategy Fund
 client logo
 
·  
Valuation Risk.  The prices provided by an Underlying Fund’s pricing services or independent dealers or the fair value determinations made by the valuation committee of the 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. The stock of value companies can continue to be undervalued for long periods of time and not realize its expected value.  The value of an Underlying Fund investing primarily in value-oriented securities may decrease in response to the activities and financial prospects of an individual company.
 
Performance Information
 
Performance information for the Fund is not included because the Fund had not commenced operations prior to the date of this prospectus.  Performance information will be available once the Fund has at least one calendar year of performance.  Updated performance information is available online at www.brownadvisoryfunds.com or by calling 800-540-6807 (toll free).
 
 
 
 
Summary Section
Brown Advisory  Multi-Strategy Fund
 client logo
 
Management
 
Investment Adviser
Portfolio Manager
Brown Advisory, LLC
Paul Chew has served as Portfolio Manager since the Fund’s inception in October 2014.
 
Purchase and Sale of Fund Shares
 
You may purchase, exchange or redeem Fund shares on any business day by written request via mail (Brown Advisory Funds, c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701), by wire transfer, or by telephone at 800-540-6807 (toll free).  Investors who wish to purchase, exchange or redeem Fund shares through a broker-dealer should contact the broker-dealer directly. The minimum initial and subsequent investment amounts for various types of accounts are shown below.
 
Type of Account
Minimum Initial Investment
Minimum Additional Investment
Institutional Shares
   
– Standard Accounts
$1,000,000
 $100
Investor Shares
   
– Standard Accounts
 $5,000
 $100
– Traditional and Roth IRA Accounts
 $2,000
 $100
– Accounts with Systematic Investment Plans
 $2,000
 $100
Advisor Shares
   
– Standard Accounts
 $2,000
 $100
– Traditional and Roth IRA Accounts
 $1,000
 N/A
– Accounts with Systematic Investment Plans
 $250
 $100
– Qualified Retirement Plans
 N/A
 N/A
 
Tax Information
 
The Fund’s distributions are taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account. Such tax-deferred arrangements may be taxed later upon withdrawal of monies from those arrangements.
 
Payments to Broker-Dealers and Other Financial Intermediaries
 
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a fund-supermarket), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services.  These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment.  Ask your salesperson or visit your financial intermediary’s website for more information.
 
 
 
 
Additional Information About the
Fund’s Principal Investment Strategies
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Investment Objective
 
The Brown Advisory Multi-Strategy Fund seeks to achieve long-term capital appreciation and current income.
 
Principal Investment Strategies
 
The Brown Advisory Multi-Strategy Fund is a “fund of funds,” meaning that under normal conditions, the Fund seeks to achieve its investment objective by investing primarily in other Brown Advisory Funds and unaffiliated investment companies, including exchange-traded funds (“ETFs”) (the “Underlying Funds”), in accordance with its target portfolio allocation.  Different Underlying Funds in which the Fund invests may invest their assets in different segments of the equity or fixed income markets in accordance with their own investment objectives and policies.  The Fund seeks to achieve its investment objective by normally investing: (1) approximately 60% (within a range of 50% to 70%) of its assets in Underlying Funds that invest in equity securities; and (2) approximately 40% (within a range of 30% to 50%) of its assets in Underlying Funds that invest in fixed income securities and cash and cash equivalents.  This target allocation is designed to provide Fund investors with opportunities for capital appreciation associated with investing in equities, as well as income opportunities associated with investing in fixed income securities.
 
Within the equity allocation, the Underlying Funds may invest in U.S. and international (including emerging markets) stocks, small-cap, mid-cap, and large-cap stocks, and growth and value stocks.  Within the fixed income allocation, the Underlying Funds may invest in short- and long-term bonds, municipal bonds, and mortgage- and asset-backed securities.
 
The Underlying Funds may utilize options, futures contracts, currency forwards, swaps and options on futures. These investments will typically be made for investment purposes consistent with the Underlying Funds’ investment objective and may also be used to mitigate or hedge risks within the portfolio or for the temporary investment of cash balances.  The Underlying Funds may also opportunistically reduce equity exposure using futures contracts.  In addition, the Underlying Funds may invest in participatory notes which are instruments that are used to replicate the performance of certain underlying issuers and markets. By investing in derivatives, the Underlying Funds attempt to achieve the economic equivalence it would achieve if it were to invest directly in the underlying security.
 
In selecting Underlying Funds, the Adviser first determines the Fund’s target portfolio allocation within the percentage ranges stated above.  The Adviser then selects individual Underlying Funds within the target portfolio allocation based on various factors, including, among others, past performance and portfolio characteristics (e.g., style, portfolio holdings, credit quality and duration).  The Adviser may sell an Underlying Fund for a variety of reasons, such as to secure gains, limit losses, or allocate assets to a different Underlying Fund.
 
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.
 
 
 
 
Additional Information About the
Fund’s Principal Investment Strategies
 client logo
 
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.
 
 
 
 
Set forth below are terms specific to certain of the Fund’s or Underlying Funds’ principal investments.
 
 
Brown Advisory
Multi-Strategy Fund
Equity Security(1)
ü
Convertible Security(2)
ü
ADRs and GDRs(3)
ü
REITs(4)
ü
ETFs(5)
ü
Market Capitalization(6)
ü
Company Fundamentals(7)
ü
Price/Earnings Ratio(8)
ü
Price/Sales Ratio(9)
ü
Price/Cash Flow Ratio(10)
ü
Debt/Fixed Income Securities(11)
ü
Emerging or Developing Markets(12)
ü
Bond(13)
ü
Investment Grade Security(14)
ü
Municipal Security(15)
ü
NRSRO(16)
ü
U.S. Government Security(17)
ü
Note(18)
ü
Maturity(19)
ü
Mortgage-Backed Security(20)
ü
Asset-Backed Security(21)
ü
Yield Curve(22)
ü
Stated Average Maturity(23)
ü
Weighted Average Maturity(24)
ü
Derivatives(25)
ü
Duration(26)
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 American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), real estate investment trusts (“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)  
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.
 
(4)  
REITs are companies that pool investor funds to invest primarily in income producing real estate or real estate related loans or interests.
 
(5)  
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.
 
 
 
 
Table of Investment Terms
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(6)  
Market Capitalization means the value of a company’s common stock in the stock market.
 
(7)  
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.
 
(8)  
Price/Earnings Ratio means the price of a stock divided by the company’s earnings per share.
 
(9)  
Price/Sales Ratio means the amount an investor is willing to pay for a dollar of revenue.
 
(10)  
Price/Cash Flow Ratio means the price of a stock divided by free cash flow per share.
 
(11)  
Debt/Fixed Income Securities means a security, such as a bond or note, that obligates the issuer to pay the security owner a specific sum of money (interest) at set intervals as well as to repay the principal amount of the security at its maturity.
 
(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 September 30, 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)  
Bond means a fixed income security with a long-term maturity, usually 5 years or longer.
 
(14)  
Investment Grade Security means a fixed income security rated in one of the four highest long-term or two short-term ratings categories by an NRSRO or unrated and determined to be of comparable quality by the Adviser as measured at the time of purchase.
 
(15)  
Municipal Security means a fixed income security issued by or on behalf of a state, its local governments and public financing authorities, and by U.S. territories and possessions.
 
 
NRSRO means a “nationally recognized statistical rating organization,” such as Standard & Poor’s, that rates fixed income securities by relative credit risk.
 
(17)  
U.S. Government Security means a fixed income security issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
 
(18)  
Note means a fixed income security with a short-term maturity, usually less than 1 year.
 
(19)  
Maturity means the date on which a fixed income security is (or may be) due and payable.
 
(20)  
Mortgage-Backed Security means a fixed income security representing an interest in a pool of underlying mortgage loans.
 
(21)  
Asset-Backed Security means a fixed income security representing an interest in an underlying pool of assets such as automobile loans or credit card receivables.
 
(22)  
Yield Curve means a graph that plots the yield of all fixed income securities of similar quality against the securities’ maturities.
 
(23)  
Stated Average Maturity means the dollar weighted maturity of the portfolio without consideration for potential changes in cash flows of the portfolio’s securities.
 
(24)  
Weighted Average Maturity refers to the dollar weighted average maturity of the portfolio, accounting for potential changes in cash flows of the portfolio’s securities due to prepayments on mortgage backed and asset backed securities, puts and calls, and other foreseen changes to stated cash flows.
 
(25)  
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).  An Underlying 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 Adviser may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by an Underlying Fund will succeed.
 
 
 
 
Table of Investment Terms
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(26)  
Duration is a measure of the expected life of a fixed income instrument that is used to determine the sensitivity of a security’s price to changes in interest rates.  For example, the value of a portfolio of fixed income securities with an average duration of two years would generally be expected to decline by approximately 2% if interest rates rose by one percentage point.  “Effective” duration is a measure of the Fund’s portfolio duration adjusted for the anticipated effect of interest rate changes on bond and mortgage pre-payment rates.  The effective duration of an Underlying Fund’s investment portfolio may vary materially from its target, from time to time, and there is no assurance that the effective duration of the Underlying Fund’s investment portfolio will not exceed these limits.
 

 
 
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.  The risks are presented in alphabetical order, not in order of importance or likelihood of occurrence.
 
 
Brown Advisory
Multi-Strategy Fund
ADRs and GDRs Risk
ü
Convertible Securities Risk
ü
Credit Risk
ü
Debt/Fixed Income Securities Risk
ü
Derivatives Risk
ü
Equity and General Market Risk
ü
ETF Risk
ü
European Securities Risk
ü
Foreign Securities/Emerging Markets Risk
ü
Growth Company Risk
ü
Inflation-Indexed Securities Risk
ü
Interest Rate Risk
ü
Investments in Other Investment Companies Risk
ü
Liquidity Risk
ü
Management Risk
ü
Medium Capitalization Company Risk
ü
Mortgage- and Asset-Backed Securities Risk
ü
Municipal Securities Risk
ü
New Fund Risk
ü
Non-Investment Grade Securities Risk
ü
Portfolio Turnover Risk
ü
Prepayment/Extension Risk
ü
Private Placement Risk
ü
Ratings Agency Risk
ü
REIT and Real Estate Risk
ü
Smaller Company Risk
ü
U.S. Government Securities Risk
ü
Valuation Risk
ü
Value Company Risk
ü
 
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.
 
 
 
 
Principal Risks
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Convertible Securities Risk
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 Underlying Funds’ 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 Underlying 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.
 
Credit Risk
If an Underlying Fund invests in fixed income securities, the value of your investment in the Fund may change in response to the credit ratings of that Underlying Fund’s portfolio securities.  The degree of risk for a particular security may be reflected in its credit rating.  Generally, investment risk and price volatility increase as a security’s credit rating declines.  The financial condition of an issuer of a fixed income security held by an Underlying Fund may cause it to default or become unable to pay interest or principal due on the security.  An Underlying Fund cannot collect interest and principal payments on a fixed income security if the issuer defaults.  Investments in fixed income securities that are issued by U.S. Government sponsored entities such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Association, and the Federal Home Loan Banks involve credit risk as they are not backed by the full faith and credit of the U.S. Government.

Debt/Fixed Income Securities Risk
The value of your investment in the Fund may change in response to changes in interest rates.  An increase in interest rates typically causes a fall in the value of the debt securities in which the Underlying Funds invest.  The longer the duration of a debt security, the more its value typically falls in response to an increase in interest rates.  The value of your investment in the Fund may change in response to the credit ratings of the Underlying Fund’s portfolio of debt securities.  The degree of risk for a particular security may be reflected in its credit rating.  Generally, investment risk and price volatility increase as a security’s credit rating declines. The financial condition of an issuer of a debt security held by an Underlying Fund may cause it to default or become unable to pay interest or principal due on the security.  An Underlying Fund cannot collect interest and principal payments on a debt security if the issuer defaults.  Prepayment and extension risks may occur when interest rates decline and issuers of debt securities experience acceleration in prepayments.  The acceleration can shorten the maturity of the debt security and force the Underlying Fund to invest in securities with lower interest rates, reducing the Fund’s return.  Issuers may decrease prepayments of principal when interest rates increase, extending the maturity of the debt security and causing the value of the security to decline.  Distressed debt securities involve greater risk of default or downgrade and are more volatile than investment grade securities.  Distressed debt securities may also be less liquid than higher quality debt securities.
 

 
 
Principal Risks
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Derivatives Risk
Certain of the Underlying Funds may invest in derivatives.  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 Underlying Fund’s performance.  The successful use of derivatives generally depends on the manager’s ability to predict market movements.
 
An Underlying Fund may use derivatives in various ways.  The Underlying 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 Underlying 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.  An Underlying Fund may use derivatives to hedge (or reduce) its exposure to a portfolio asset or risk.  An Underlying Fund may use derivatives for leverage.  The Underlying Funds may also use derivatives to manage cash.
 
Derivatives are subject to a number of risks described elsewhere in this section, such as liquidity risk, interest rate risk, credit risk and general market risks.  An Underlying Fund’s use of derivatives may entail risks greater than, or possibly different from, such risks and other Principal Risks to which the Underlying Fund is exposed, as described below.  Certain of the different risks to which an Underlying Fund might be exposed due to its use of derivatives include the following:
 
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 an Underlying Fund may use some derivates 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.
 
Segregation Risk is the risk associated with any requirement, which may be imposed on the Underlying Fund, to segregate assets or enter into offsetting positions in connection with investments in derivatives.  Such segregation will not limit the Underlying Fund’s exposure to loss, and the Underlying Fund may incur investment risk with respect to the segregated assets to the extent that, but for the applicable segregation requirement, the Underlying Fund would sell the segregated assets.
 
Equity and General Market Risk
An Underlying Fund’s investments in equity securities may subject the Fund to volatility and the following risks:
 
 
 
·
prices of stocks may fall over short or extended periods of time;
 
·
cyclical movements of the equity market may cause the value of the Underlying 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 the Underlying Funds’ portfolio securities.  The market value of securities in which the Underlying Funds invest 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 Adviser believes to be the true value or growth potential of the stocks held by an Underlying Fund;
 
·
the earnings of the companies in which an Underlying 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