Brown Advisory US Smaller Companies PLC (the 'Company')

Legal Entity Identifier: 549300HKKL9K1NY4TW55

Annual Financial Results for the year ended 30 June 2022

Financial Highlights for the year ended 30 June 2022

Ordinary Share Performance

Ten year record

Stephen White, Chairman, Brown Advisory US Smaller Companies, said:

"Market volatility driven by political and economic uncertainty has impacted the whole US small cap sector since early 2022, however, the Board believes the established small cap philosophy and rigorous investment process applied by Chris Berrier and his team is the right one in the longer term. It is pleasing that even with the considerable market volatility during the period, notable rotation from 'growth' to 'value' and a policy of low turnover, the team has outperformed slightly the index, given its focus on quality growth. Once fundamentals start to improve we expect to see the US small cap sector at the forefront of any recovery."

Chris Berrier, Portfolio Manager, Brown Advisory US Smaller Companies, said:

"We have asserted for the last six to nine months that the first half of 2022 would be challenging for more growth-oriented stocks as the Fed alters its policy priorities to manage the threat of persistently high inflation - and clearly it was even more challenging than expected. We also believe that as inflation and interest rates peak and valuations compress, the probability of higher growth companies reclaiming market leadership feels relatively high.

"We are growing more offensively minded and optimistic that we can find business franchises during this period of volatility that fit our underlying '3G' characteristics."

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Chairman's Statement

Dear Fellow Shareholder

For the twelve months ended 30 June 2022, your Company's net asset value (NAV) per share fell from 1516.34p to 1303.87p, a decline of 14.0%. Although disappointing in absolute terms, the performance was encouragingly slightly better than the Company's benchmark, the sterling adjusted Russell 2000 Total Return Index, which fell by 15.2%. Having done well the previous year, US smaller companies proved more disappointing in 2021/2022, both in absolute terms and relative to their larger US peers. In US dollars, the Russell 2000 returned a negative 25.2%, compared to the smaller negative 10.6% for the S&P 500. At least for UK investors, the negative returns from the US smaller company asset class were compensated in part by the 12.0% appreciation of the US dollar versus sterling.

Over the period, the Company's share price fell from 1437.50p to 1105.00p. This resulted in a widening in the discount from 5.2% to 15.3% as markets became more volatile after the Russian invasion of Ukraine. As a result of the continuing market volatility the Board decided to minimise interventions in the short term.

Market Review

Having moved largely sideways in the first six months of the period under review, the US equity market began to falter in early 2022 as political and economic storm clouds gathered. Russia's unexpected and brutal invasion of Ukraine sent shock waves across the globe, presaging a change in the world order. Inflationary pressures mounted as the war impacted supply chains and the prices of oil, commodities and food all soared as shortages appeared. Bond yields rose as the Federal Reserve and other central banks abandoned their previous accommodative monetary policies and warned of a major tightening in order to combat inflation, regardless of whether this would push the economies into recession.

As the outlook became more uncertain, the US stock market turned more volatile and trended lower. Earnings disappointments were severely punished, merger and acquisition activity fell and retail investors, a major force earlier, retreated to the side-lines. Within the market, as long bond yields rose, investors' interest rotated away from the highly rated growth stocks, notably in technology, which had been former winners, to the more perceived value end of the spectrum. Despite this, the focus remained for most of the year on the large cap stocks, rather than on small cap, as reflected in the outperformance again of the S&P compared to the Russell 2000 which fell respectively by 10.6% and 25.2% in US Dollar total return terms.

Portfolio Manager

A more detailed report on the development of the US smaller company sector over the past year and our activity  and performance is included in the Portfolio Manager's Review.

The Board believes that the established small cap. philosophy and rigorous investment process applied by Chris Berrier and his team is the right one in the longer term. And it is also pleasing to note that even with the considerable market volatility during the period, notable rotation from 'growth' to 'value' and a policy of low turnover that the team has managed to outperform slightly the index.

Revenue and Capital Returns

The net loss per Ordinary share was 212.55p, split (8.52p) to Revenue and (204.03p) to Capital. Dividend income was lower reflecting not only the shift in the portfolio with our new Portfolio Manager towards lower yielding and more growth-oriented companies, but also the fact that many companies of all types reduced their pay-outs during the pandemic. With expenses broadly unchanged, the net Revenue loss was higher. The Capital loss reflects the fall in value of the portfolio over the period. We still believe it appropriate to allocate all expenses to the Revenue account. No distributable revenue is available for the payment of dividends.

Share Price and Discount

The Board remains committed to its policy of using share buybacks with the intention that over a period and in normal market conditions the market price of its shares is limited to around 10% discount to NAV per share.

Over the period under review the Company's share price fell 23.1% to 1,105.0p. As a result, the discount to NAV widened from 5.20% on 30 June 2021 to 15.3% on 30 June 2022. Given the more adverse market conditions, especially in the second half of the year, and the heightened volatility, coupled with the fact that for much of the time the discount remained within our limits, only 12,539 shares were bought in during the period under review at an average discount of 11.0%. In the prior year, we had bought in 1,025,101 shares at an average discount of 12.7%. As at 15 September 2022, the discount was 13.0%.

At 30 June 2022, the number of shares held in treasury was 6,271,254 and the total number in public hands was 11,952,159.

Gearing

As an Investment Trust, the Company may use gearing for investment purposes in order to enhance returns. Over the past year, however, the Board did not feel it was appropriate to raise gearing given the more unsettled political and economic background and the greater market volatility. However, when market conditions improve and prospects for our sector brighten the decision to gear will be reviewed.

Environmental, Social and Governance ('ESG')

The Board has continued to engage with the Portfolio Manager on ESG matters. Governance has been a key focus within the Portfolio Manager's investment process for many years and they use their regular meetings with companies to discuss and challenge management on their adherence to best practice. Further information on the Portfolio Manager's approach to ESG matters is set out in the ESG report.

Board Composition

There were no changes to the Board in the period since the last AGM as a period of consolidation was thought appropriate after the two Directors stepped down from the Board during 2021. Having taken stock, we have now put our succession plans in place.

All four directors will be representing themselves at the AGM. Long-standing Board member Clive Parritt will be standing for re-election for one final year. The Company has benefited hugely from his knowledge and experience, particularly during this period of transition with our changes of Manager and Portfolio Manager, and the Board believes that it is in the interests of shareholders that he be re-elected for one more year. We believe that tenure alone is not a valid criterion for determining independence and what counts in a Board is the diversity of skills, knowledge and experience.

When Clive Parritt steps down in a year's time, it is intended that Tina Soderlund-Boley will take on the role of Senior Independent Director. The Board has also begun the search for a new director as audit chair designate to take over eventually from Lisa Booth, our current audit chair. Nurole Limited has been engaged to help with the search and it is hoped that a candidate will have been selected ahead of the AGM in October.

Annual General Meeting

This year's AGM will be held on Monday, 31 October 2022 at 2:00 p.m. at the ICAEW, Chartered Accountants' Hall, Moorgate Place, London EC2R 6EA. It will include a short presentation in person by Chris Berrier, Portfolio Manager, covering performance of the Company over the past year, as well as an outlook for the future. The Board and Portfolio Manager would welcome questions which shareholders may submit to:

InvestmentTrustEnquiries@brownadvisory.com. Subject to confidentiality, we will respond to any questions submitted either directly or by publishing our response on the Company website.

Electronic proxy voting is now available, and shareholders are encouraged to submit voting instructions using the web-based voting facility www.eproxyappointment.com and www.proxymity.io for institutional shareholders. In order to use electronic proxy voting, shareholders will require their shareholder registration number, control number and pin. If you do not have access to these details please contact the Company's Registrar, Computershare.

Shareholder Communications

The Board encourages shareholders to visit the Company's website (www.brownadvisory.com/basc) for the latest information, podcasts and monthly factsheets.

Outlook

Equity markets are likely to remain unsettled for the time being, and US smaller companies are no exception. How long the war in Ukraine will last and what direction it will take, how far the Federal Reserve will raise interest rates in an effort to rein in inflation without causing a recession, how resilient the consumer will remain as purchasing power declines and how corporate profits will hold up given the rise in input costs including labour are all questions weighing on markets and which will take time to resolve. However, once the fundamentals do start to improve, we

see the US again at the forefront of any recovery. Given their greater exposure to the domestic market US smaller companies should benefit accordingly, thus justifying a dedicated allocation in any portfolio and a commitment to our Portfolio Manager's proven approach in identifying attractive opportunities within the space.

Stephen White

20 September 2022

Portfolio Manager's Review

In a challenging 12 months to 30 June 2022, the Company's Net Asset Value (NAV) fell 14.0%. However, it achieved moderate outperformance of the benchmark, the sterling adjusted Russell 2000 Total Return Index, which declined 15.2% over the same period.

Performance Review

The year that just concluded was nearly a mirror image of the prior year. The fuel that drove the market rally through June of 2021 has dissipated. Interest rates are rising quickly from previous ultra-low levels. The Federal Reserve's balance sheet is shrinking. The pandemic-induced stimulus is now in the rear-view mirror. Economic growth is slowing and credit spreads are widening, signalling a potentially more treacherous environment ahead. Our investment process is about analysing change in the market. Unfortunately, for the period under review the macro-economic change was negative and so were investment returns.

In any market environment, our process is focused on finding, evaluating and owning - at the right price and over a multi-year timeframe - businesses that demonstrate our "3G" qualities (that is, durable growth, sound governance, and scalable 'go-to-market' strategies) and which can make the difficult journey from small- to mid- to large-cap status. The relative outperformance generated over the last 12 months was due to stock selection, an allocation of capital away from the overvalued areas of the market, and extra prudence due to historically high valuations that resulted from a favourable Federal Reserve policy in 2020 and much of 2021. However, market conditions have changed and so have our views. We now believe that the valuation correction in smaller-cap companies has largely run its course. And although we know that earnings estimates are poised to decline, perhaps meaningfully, we currently have a much more positive mindset and want to use the likely forthcoming weakness in financial performance to scale-up existing positions and add a number of new positions that we believe will contribute to absolute and relative performance over the short and long term. We acknowledge that perfect execution in the current challenging market environment will be difficult. However, we will strive to be directionally correct in our efforts.

We have asserted for the last 6 to 9 months that the first half of 2022 would likely be challenging for more growth-oriented stocks as the Federal Reserve alters its policy priorities to manage the threat of persistently high inflation. Clearly, given the returns in the first half of 2022, it was even more challenging than expected. However, we also believe that as inflation peaks, rates peak and valuations compress, the probability of higher growth companies reclaiming market leadership during some point in the second half of 2022 feels relatively high. We hope the combination of a more constructive backdrop for our space and continued solid stock selection will yield better absolute returns and continuing solid relative results going forward.

Portfolio Review

The present positioning of the Company has not been altered materially despite numerous changes over the past year. We have continued to emphasize quality and diversity in this difficult equity market. We are still carrying a higher cash balance so that we have some available 'dry powder' to deploy as volatility persists. Our shareholders will likely continue to witness a balanced approach to our capital deployment process due to the current global backdrop.

There were three sectors in the year under review that had a meaningfully positive contribution to return. Relative returns across consumer discretionary, healthcare and information technology were strong and driven by stock selection, but also a conscious effort to avoid the most excessively overvalued names across subsectors. Energy was the biggest detractor to returns, primarily due to the sector's positive performance and our underweight to the space.

Moving one level down to individual security contribution to returns, there were a few contributors and detractors of note. On the positive side of the ledger, BioHaven Pharmaceutical Holdings and Acceleron Pharma, two biotechnology holdings, produced strong returns in a difficult environment due to their announced acquisition by Pfizer and Merck, respectively. Within our technology holdings, Mimecast, an email security company, rose roughly 50% on an acquisition by a private equity firm.  ManTech International, a cybersecurity defence  contractor, also produced a positive return on another acquisition by a private equity firm. Finally, FTI Consulting, a diversified global consulting firm, performed well as a component of its business tends to accelerate during difficult economic times, which helped make it a safe haven as investment sentiment soured.

On the negative side, there was not a consistent theme. Neogenomics and Accolade are two healthcare holdings that experienced idiosyncratic issues in a segment of the market that struggled generally, creating the most negative impact to performance within the portfolio. Bright Horizons and IAA, two defensive consumer services holdings, did not act in the defensive manner we expected, primarily due to the uncertainty associated with COVID-19. Finally, AZEK, a leading composite decking company, fell meaningfully from its highs as interest rates rose and sentiment on housing-related issues deteriorated markedly.

Portfolio Positioning

Over the course of the financial year, we added 14 new companies to the portfolio, with the majority of those being added in the most recent three months. These companies fall into several sectors including healthcare, information technology, industrials, energy and communication services. Some examples include:

·      Azenta, a leading player in biological sample cold storage. We believe that this space should continue experiencing near 20% growth as more biological cell and gene therapies move from discovery to clinical trials.

·      Casella Waste Systems, a well-run waste management business operating in the landfill constrained US Northeast region, creating a favorable environment for price-led revenue growth and margin expansion.

·      Teleflex, a multinational medical device company with a diversified portfolio of increasingly high-growth, high-margin products that should see accelerating growth and earnings as the pandemic moves to its endemic phase.

·      Vizio Holding, a leading TV manufacturer with a burgeoning advertising business that leverages its strong software operating system. The company's management believes that hardware and software control are critical to building the right operating ecosystem for a large, profitable advertising segment driven by the shift to video-on-demand consumption and away from linear broadcast.

Our top ten holdings in the portfolio remain some of our highest conviction investments and many of these companies have been in the portfolio for a multi-year period. Several of them also appear in the top contributors to performance over the year, mentioned above, which supports this conviction. Others remain core holdings, like Waste Connections, Evo Payments Inc. and Insurance Auto Auctions (IAA). The latter is a leading global digital marketplace connecting vehicle buyers and sellers. Earlier this year, George Sakellaris led an in-depth interview with John Kett, CEO of IAA, which you can listen to on our website.

Waste Connections is the third largest solid waste collection and disposal company in North America, and in geographies deemed most attractive by its management team it is either the monopoly or the dominant provider. Forty per cent of revenues come from exclusive or franchised regions where Waste Connections is sole provider. The company demonstrates industry-leading margins and pricing power given its structurally favourable market presence, limited competition and scale, allowing it to be a low-cost provider in a largely commoditised industry. The company manages multi-year contracts with annual price increases to protect against cost inflation and we believe the management team are highly capable. In our view, Waste Connections can continue to consolidate the industry by acquiring collection and disposal operations at attractive multiples, integrating them and materially improving their margin structure.

Evo Payments is a global merchant acquirer and payment processor servicing over 50 markets worldwide with local operations in 12 countries. In 2021, they processed 4.2 billion transactions for more than 550,000 merchants. They have established sales channels and relationships in both large developed economies as well as fast-growing developing and emerging markets with lower penetration rates of electronic payments. Their strong organic growth profile has been coupled with prudent mergers and acquisitions (M&A) to build a strong global franchise that we believe makes this a desirable stand-alone asset; potentially also a suitable asset for a larger player in the industry looking to gain scale.

Outlook

Overall, we remain confident that following a disciplined investment philosophy and process can yield favourable risk-adjusted returns in the U.S. small-cap market over time. We also remain convinced that the foundation of our efforts, our team, remains solid. With the recent downdraft in the equity market, we are growing more offensively minded and are optimistic that we can find business franchises during this period of volatility that fit our underlying '3G' characteristics. Our challenge is that we live in a very complex world at the moment, but we believe that our bottom-up approach should serve us well as volatility continues. We know we can't predict what will happen going forwards. We will simply continue to strive to be prepared for what is to come.

We move into the second half of 2022 with the belief that better relative days are likely ahead at some point for higher growth stocks. We will attempt to capitalize on this as it unfolds by deploying capital into attractive risk-adjusted return opportunities.

Portfolio Manager

Brown Advisory LLC

20 September 2022

Strategic Report

The Strategic Report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.

The Strategic Report seeks to provide shareholders with the relevant information to enable them to assess the performance of the Board during the period under review.

Business and Status

During the year the Company carried on business as an investment trust with its principal activity being portfolio investment. The Company has been approved by HM Revenue & Customs as an investment trust subject to the Company continuing to meet the eligibility conditions of sections 1158 and 1159 of the Corporation Tax Act 2010 ('CTA 2010') and the ongoing requirements for approved companies as detailed in Chapter 3 of Part 2 of the Investment Trust (Approved Company) (Tax) Regulations 2011.  In the opinion of the Directors, the Company has conducted its affairs in the appropriate manner to retain its status as an investment trust.

The Company is an investment company within the meaning of section 833 of the Companies Act 2006.

The Company is not a close company within the meaning of the provisions of the CTA 2010 and has no employees.

The Company was incorporated in England & Wales on 15 January 1993.

There has been no significant change in the activities of the Company during the year to 30 June 2022 and the Directors anticipate that the Company will continue to operate in the same manner during the current financial year.

Gearing

Gearing is defined as the ratio of a company's debt less cash held, compared to its equity capital, expressed as a percentage. The effect of gearing is that, in rising markets, the Company will benefit to the extent that the growth of the Company's investment portfolio exceeds the cost of paying interest and charges to lenders and other creditors. Conversely, in falling markets the Company suffers more if the Company's investment portfolio underperforms the cost of such interest and charges.

The Company was not geared during the year.

Key Performance Indicators

At quarterly Board meetings, the Directors consider a number of performance indicators to assess the extent to which the Company is meeting its objective. The key performance indicators used to measure the performance of the Company over time are as follows:

·      Net Asset Value changes;

·      The discount or premium of share price to Net Asset Value;

·      A comparison of the absolute and relative performance of the Ordinary share price and the Net Asset Value per share relative to the return on the Company's Benchmark Index and of its peers;

·      Ordinary share price movement; and

·      The Company's ongoing charges ratio.

In addition, a history of the Net Asset Value, Ordinary share price and Benchmark Index are shown on the monthly factsheets which can be viewed on the Portfolio Manager's website www.brownadvisory.com/basc.

Discount to Net Asset Value

The Directors regularly review the level of the discount or premium between the closing price of the Company's Ordinary shares and the Net Asset Value. The Company will issue shares when there is sufficient demand. Such issues are always at a price which is in excess of the NAV. No shares were issued during the year under review.

The Board will continue to apply its policy of buying back shares at appropriate times with a view to limiting any discount in the longer term to around 10%. The Directors had powers granted to them at the last Annual General Meeting ('AGM') held on 29 November 2021 to purchase Ordinary shares and either cancel or hold them in treasury as a method of controlling the discount to Net Asset Value and enhancing shareholder value.

The Company repurchased 12,539 Ordinary shares during the year under review at an average discount of 10.9%.

Under the Listing Rules, the maximum price that may be paid by the Company on the repurchase of any Ordinary shares is 105% of the average of the middle market quotations for the Ordinary shares for the five business days immediately preceding the date of repurchase. The minimum price will be the nominal value of the Ordinary shares. The Board is proposing that its authority to repurchase up to approximately 14.99% of its issued share capital (excluding treasury shares) be renewed at the AGM. The new authority to repurchase will last until the conclusion of the AGM of the Company in 2023 (unless renewed earlier). Any repurchase made will be at the discretion of the Board in light of prevailing market conditions and within guidelines set from time to time by the Board, the Companies Act, the Listing Rules and the Market Abuse Regulation.

Treasury Shares

In accordance with the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the 'Regulations') which came into force on 1 December 2003 any Ordinary shares repurchased, pursuant to the above authority, may be held in treasury. These Ordinary shares may subsequently be cancelled or sold for cash. This gives the Company the ability to reissue shares quickly and cost effectively and provides the Company with additional flexibility in the management of its capital.

At 30 June 2022 there were 6,271,254 Ordinary shares held in Treasury.

Management

The Company has no employees and most of its day-to-day responsibilities are delegated to Brown Advisory LLC which acts as the Company's Portfolio Manager and FundRock Partners Limited which acts as the Company's Alternative Investment Fund Manager ('AIFM') and Company Secretary.

J.P. Morgan Europe Limited ('JPMEL') acts as the Company's Depositary. The Company has also entered into an outsourcing arrangement with J.P. Morgan Chase Bank N.A. ('JPMCB') as Custodian and for the provision of accounting services.

Viability Statement

In accordance with Provision 36 of the Code of Corporate Governance as issued by the Association of Investment Companies in February 2019 (the 'AIC Code'), the Board has assessed the prospects of the Company over a longer period than the twelve months required by the 'Going Concern' provision, reviewing the next three years and assessing the implications of the next required vote on the continuation of the Company at the 2023 AGM. The Board has confirmed that, following consultation with key stakeholders, they consider the continuation vote will be approved by the shareholders. The Company's investment objective is to achieve long-term capital growth by investing in a diversified portfolio primarily of quoted US smaller and medium-sized companies. The Board regards the Company's shares as a long-term investment.

The Board has considered the Company's business model including its investment objective and investment policy, the principal and emerging risks and uncertainties that may affect the Company, the size threshold below which the Company would be considered uneconomic or unviable, and the Company's performance and attractiveness to investors in the current environment. The Board has noted that:

·      the Company holds a liquid portfolio invested predominantly in US listed equities;

·      the Company is not geared;

·      the Company has maintained a reasonable performance and share price discount to NAV;

·      the portfolio management fee is the most significant expense of the Company. It is charged as a percentage of the Company's net asset value and so would reduce if the market value of the portfolio were to fall. The remaining expenses are modest in value and predictable in nature;

·      no significant increase to ongoing charges or operational expenses is anticipated; and

·      the Board is satisfied that Brown Advisory LLC and the Company's other key third-party suppliers maintain suitable processes and controls to ensure that they can continue to provide their services to the Company.

The Board has also considered the market outlook, both for US smaller company equities and for investment trusts, and has concluded that these remain an attractive opportunity for investors.

The Board has therefore concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three years.

Principal and Emerging Risks and Uncertainties

The principal and emerging risks and uncertainties that may affect the Company are described below:

Investment policy and process - Inappropriate investment policies and processes may result in underperformance against the prescribed Benchmark Index and the Company's peer group. The Board manages these risks by ensuring a diversification of investments and regularly reviewing the portfolio asset allocation and investment process.

Investment Strategy and Share Price Movement - The Company is exposed to the effect of variations in the price of its investments. A fall in the value of its portfolio will have an adverse effect on shareholders' funds. It is not the aim of the Board to eliminate entirely the risk of capital loss, rather the Company's objective is to achieve long-term capital growth as such long-term capital growth is more consistent. The Board reviews the Company's investment strategy and the risk of adverse share price movements at its quarterly board meetings considering the economic climate, market conditions and other factors that may have an effect on the sectors in which the Company invests.

Liquidity Risk - The Company may invest in securities that have a very limited market which will affect the ability of the Portfolio Manager to dispose of securities when it is no longer felt that they offer the potential for future returns. However, investments in unlisted securities must not exceed 5% of total assets at the time of investment and any such investments require prior Board approval.

Also, the Company's shares may experience liquidity problems when shareholders are unable to realise their investment in the Company because there is a lack of demand for the Company's shares.

At its quarterly meetings, the Board considers the current liquidity in the Company's investments when setting restrictions on the Company's exposure. The Board also reviews, on a quarterly basis, the Company's buy-back programme and in doing so is mindful of the liquidity in the Company's shares.

Discount to Net Asset Value - If the price at which the Company's shares trade is at a discount to Net Asset Value shareholders will be unable to realise the true underlying value of their investment. The Directors had powers granted to them at the last Annual General Meeting to purchase Ordinary shares as a method of controlling the discount to Net Asset Value and enhancing shareholder value.

Regulatory Risk - The Company operates in a complex regulatory environment and faces a number of regulatory risks. A breach of section 1158 of the CTA 2010 could result in the Company being subject to capital gains tax on portfolio movements. Breaches of other regulations such as the Listing Rules, could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers such as the Portfolio Manager could also lead to reputational damage or loss. The Board relies on the services of its Portfolio Manager, Company Secretary, AIFM and professional advisers to ensure compliance with, amongst other regulations, the Companies Act 2006, the FCA Listing Rules and Disclosure Guidance and Transparency Rules, and the Alternative Investment Fund Managers Directive. The Portfolio Manager is contractually obliged to ensure that its conduct of business conforms to applicable laws and regulations.

Credit and Counterparty Risk - The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.

Loss of Key Personnel - The day-to-day investment management of the Company has been delegated to the Portfolio Manager. Loss of the Portfolio Manager's key personnel could affect investment return. The Board is aware that the Portfolio Manager has implemented competitive remuneration practices and succession planning for the purposes of operational resiliency. The Portfolio Manager has a substantial team of investment professionals and the Board believes that this should provide adequate cover in the event of an emergency.

Operational - Failure of the core accounting systems, or a disastrous disruption to the Portfolio Manager's business, that of the AIFM, or that of JPMCB, could lead to an inability to provide accurate reporting and monitoring.

Financial - Inadequate financial controls could result in misappropriation of assets, loss of income and debtor receipts and inaccurate reporting of Net Asset Value per share. The Board annually reviews the AIFM's and Portfolio Manager's reports on their internal controls and procedures.

Details of how the Board monitors the operational services and financial controls of Brown Advisory LLC, FundRock Partners Limited and J.P. Morgan are included within the Internal Control section of the Report of the Directors.

Enterprise risk is reviewed biannually by the Board, taking into its remit emerging risks as they become immediate, while maintaining a long-term perspective where they are evolving.

Directors

At 30 June 2022 the Board comprised two female and two male directors.

Employees, Environmental, Social and Human Rights issues

The Company has no employees and, therefore no disclosures need to be made in respect of employees. The Board has delegated the day-today management and administration functions to the Portfolio Manager, the AIFM, JPMEL, JPMCB and other third-party service providers.

Integration of Environmental, Social and Governance ('ESG') considerations into the Portfolio Manager's Investment Process

A report from the Portfolio Manager is included in the Annual Report & Accounts for the year ended 30 June 2022.

Modern Slavery Act

The Modern Slavery Act 2015 requires certain companies to prepare a slavery and human trafficking statement. As the Company has no employees and does not supply goods and services, no statement is required.

Global Greenhouse Gas Emissions

The Company has no greenhouse gas emissions to report from its operations as its day-to-day management and administration functions have been outsourced to third parties and it neither owns physical assets or property nor has employees of its own. It therefore does not have responsibility for any emissions-producing sources under the Companies Act 2006 (Strategic Report on Directors' Reports) Regulations 2013.

Section 172 Statement

Under Section 172 ('S172') of the Companies Act 2006, the Directors have a duty to act in good faith and to promote the success of the Company for the benefit of its shareholders as a whole. This includes taking into consideration the likely consequences of their decisions in the long-term and in respect of the Company's stakeholders such as its shareholders, employees and suppliers, while acting fairly as between shareholders.

The Directors must also consider the impact of the Company's decisions on the environment, the community and its reputation for maintaining high standards of business conduct.

The Company ensures that the Directors are able to discharge this duty by providing them with relevant information and training on their duties. The Company also ensures that information pertaining to its stakeholders is provided, as required, to the Directors as part of the information presented in regular Board meetings in order that stakeholder considerations can be factored into the Board's decision-making. The Directors' responsibilities are also set out in the schedule of matters reserved for the Board and the terms of reference of its audit committee, both of which are reviewed regularly by the Board. At all times the Directors can access, either collectively or individually, advice from its professional advisers including the Company Secretary and independent external advisers.

The Company's investment objective, to achieve long-term capital growth by investing in a diversified portfolio primarily of quoted US smaller and medium-sized companies, supports the Directors' statutory obligations to consider the long-term consequences of the Company's decisions. How the long-term focus of the Company is achieved, is set out in more detail in the Annual Report & Accounts for the year ended 30 June 2022 including in the above section on the Portfolio Manager's approach to ESG considerations. This approach is fundamental to the Company achieving long-term success for the benefit of all stakeholders.

The Company is aware of its own potential impact on the environment and has practical policies in place to reduce that impact. Examples include the use and sharing of electronic Board materials and the provision of electronic copies of the annual report and accounts to shareholders and via the Company website. Where physical copies of the annual and half yearly financial reports are made, materials and processes are used which are designed to both minimise the environmental impact and to maximise the recycling potential as described in more detail on the inside back cover of this document.

Engagement with suppliers, customers and others and the effect on principal decisions

The Shareholders - The shareholders of the Company are both institutional and retail and details of those with substantial shareholdings are provided in the Annual Report & Accounts for the year ended 30 June 2022.

The Board believes that shareholders have a vital role in encouraging a higher level of corporate performance and is committed to listening to the views of its shareholders and giving useful and timely information. The Board provides open and accessible channels of communication including those listed below.

The AGM - The Company encourages participation from shareholders at its AGMs where they can communicate directly with the Directors and Portfolio Manager. The AGM will include a short presentation by the Portfolio Manager on the performance of the Company over the past year, as well as an outlook for the future.

The Board and Portfolio Manager welcome questions which shareholders may submit to InvestmentTrustEnquiries@brownadvisory.com. Subject to confidentiality, we will respond to any questions submitted either directly or by publishing our response on the Company website. All views of the shareholders will be taken into consideration and action taken where appropriate.

Online Information - The Company website contains the Annual and Half Yearly Financial Report along with monthly factsheets and commentaries from the Portfolio Manager. The daily NAV per share, monthly top ten portfolio listings and other regulatory announcements can be found on the regulatory news service of the London Stock Exchange.

Shareholder Communications

Shareholders can raise issues or concerns at any time by writing to the Chairman or the Senior Independent Director at the Registered Office.

The AIFM and the Portfolio Manager

Brown Advisory LLC acts as the Company's Portfolio Manager and FundRock Partners Limited has been appointed as the Company's AIFM.

The portfolio management function is critical to the long-term success of the Company. The Board and the Portfolio Manager maintain an open and constructive relationship, with meetings taking place a minimum of four times per annum, with monthly updates and additional meetings as required.

The 'Management of the Company' section details the Board's consideration of the Portfolio Manager's performance, its terms of appointment and their annual assessment of its continued stewardship of the portfolio and its oversight of the administrative functions.

The Audit Committee meets at least twice a year and as part of its role considers the reports on the internal control objectives and procedures of the Portfolio Manager, the AIFM, JPMEL and JPMCB together with the opinion of the service auditors for these reports.

The AIFM also supplies company secretarial services to the Company. The AIFM oversees the activities of the Company's other third-party suppliers on behalf of the Company and maintains open and collaborative relationships to maintain quality, efficiency and cost control through regular communication with operational teams. The Board regularly reviews reports from the Portfolio Manager, the AIFM and Company Secretary, the depositary, the Company's broker, the investor relations research provider and the Independent Auditor.

These provide vital information concerning changes in market practice or regulation which affect the Company and assist the Board in its decision-making process. Representatives from these providers attend Company Board meetings and give presentations on a regular basis enabling in depth discussions concerning their findings and performance.

Other Third-Party Service Providers

As an externally managed investment company with no employees or physical assets, the principal stakeholders of the Company are its shareholders, Portfolio Manager, AIFM, depositary, custodian, administrator and registrar.

The continuance, or otherwise, of engagement of key third-party service providers are principal decisions taken by the Board every year.

In Summary

The governance structure and decision-making process are underpinned by the duties of the Directors under S172 on all matters. The Board firmly believes that the sustainable long-term success of the Company is dependent upon taking account of the interests of all its key stakeholders.

For and on behalf of the Board

Stephen White

Chairman

20 September 2022

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws) including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and the Republic of Ireland.

Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the return or loss of the Company for that period. In preparing those financial statements, the Directors are required to:

(a)   select suitable accounting policies and then apply them consistently;

(b)   make judgements and accounting estimates that are reasonable and prudent;

(c)   state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

(d)   prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Report of the Directors, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website www.brownadvisory.com/basc, which is a website maintained by Brown Advisory LLP. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, who are listed in the Annual Report & Accounts, confirms to the best of their knowledge that:

(a)   the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

(b)   the Strategic Report of the Directors include a fair review of the development and performance of the Company, together with a description of the principal risks and uncertainties that the Company faces; and

(c)   in their opinion the Annual Report & Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary to assess the Company's position and performance, business model and strategy.

So far as each Director is aware at the time the report is approved:

(a)   there is no relevant audit information of which the Company's auditor is unaware; and

(b)   the Directors have taken all steps required of a company director to make themselves aware of any relevant audit information and to establish that the Company's auditor has been made aware of that information.

By order of the Board

Stephen White

Chairman

20 September 2022

Income Statement

for the year ended 30 June 2022

The total column of this statement is the profit and loss account of the Company.

The 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by The Association of Investment Companies. The Company has no other items of other comprehensive income, and therefore the net return after taxation is also the total comprehensive income for the year.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The Notes below form part of these accounts.

Statement of Financial Position

as at 30 June 2022

The financial statements were approved by the Board of Directors and signed on its behalf on 20 September 2022.

Stephen White

Chairman

Company Registration Number 02781968

The Notes below form part of these accounts.

Statement of Changes in Equity

for the year ended 30 June 2022

for the year ended 30 June 2021

Notes to the Accounts for the year ended 30 June 2022

1.   Accounting policies

Basis of preparation

The financial statements for the year ended 30 June 2022 have been prepared in accordance with UK Generally Accepted Accounting Practice ('UK GAAP') including Financial Reporting Standard 102 ('FRS 102'), the financial reporting standard applicable in the UK and Republic of Ireland and with the Statement of Recommended Practice ('SORP') for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies ('AIC') in October 2019.

The Company continues to adopt the going concern basis in the preparation of the financial statements. The financial statements have been prepared in accordance with the Company's accounting policies as set out below. They are presented in accordance with the Companies Act 2006 (the 'Act') and the requirements of the SORP 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in October 2019.

The Company has taken advantage of the exemption from preparing a Cash Flow Statement under FRS 102, as it is an investment fund and the investments are substantially all highly liquid and carried at fair (market) value.

In accordance with FRS 102, the Company is required to nominate a functional reporting currency in which the Company predominantly operates. Having regard to the Company's share capital and the predominant currency in which its shareholders operate, pounds sterling is the nominated functional reporting currency of the Company.

Statement of Compliance

The financial statements of the Company have been prepared in compliance with United Kingdom Accounting Standards, including FRS 102 and the Companies Act 2006.

Significant accounting judgements, estimates and assumptions

The preparation of the Company's financial statements on occasion requires management to make judgements, estimates and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the current and future periods, depending on circumstance.

Management do not believe that any significant accounting judgements have been applied to these financial statements other than the allocations between capital and revenue.

Further details of the Company's accounting policies can be found in the Annual Report & Accounts for the year ended 30 June 2022.

7.   Net asset value per Ordinary share           

The net asset value per Ordinary share is based on the net assets attributable to the equity shareholders of £155,840,000 (2021: £181,426,000) and 11,952,159 on (2021: 11,964,698) Ordinary shares, being the number of Ordinary shares in issue at the year end.

8.   Related parties and transactions with the manager

Directors

There are no transactions with the Directors other than aggregated remuneration for services as Directors as disclosed in the Directors' Remuneration Report and as set out in the notes to the accounts and the beneficial interests of the Directors in the Ordinary shares of the company as detailed in the Annual Report & Accounts for the year ended 30 June 2022.

Transactions with the manager

FundRock is AIFM to the Company pursuant to an Alternative Investment Fund Management Agreement between FundRock and the Company. FundRock has also been appointed to provide company secretarial services to the Company.

Brown Advisory is appointed to provide portfolio management services pursuant to a Portfolio Management Agreement between the Company, FundRock and Brown Advisory.

The management fee is calculated at an annual rate of 0.7% on the first £200 million; 0.6% of the next £300 million; and 0.5% thereafter of the Company's adjusted net assets.

The management fee is payable by the Company to FundRock, who shall deduct from the management fee the amounts due to it as AIFM and for company secretarial services and shall pay the balance to Brown Advisory.

The management fee is calculated and payable on a quarterly basis.

The management fee payable to FundRock, out of which a fee is payable to Brown Advisory, for the period from 1 July 2021 to 30 June 2022 was £1,192,000 (payable to JUTM for the period from 1 July 2020 to 31 March 2021: £905,000) with £275,000 outstanding as at 30 June 2022 (2021: £328,000).

The management fee for the period 1 April 2021 to 30 June 2021 was £326,000 with £nil outstanding as at 30 June 2021 but these fees were waived to offset the costs incurred in transitioning to Brown Advisory.

For the year ended 30 June 2021, costs associated with the transition of the AIFM and Portfolio Manager comprised £273,000 of legal and other expenses and £53,000 of portfolio transaction costs. These costs were defrayed by the waiver of £326,000 of management fee.

The appointment of Brown Advisory and FundRock may be terminated by not less than six months' notice.

9.   Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments outstanding at 30 June 2022 (2021: nil).

10. Annual results

This Annual Results announcement does not constitute the Company's statutory accounts for the years ended 30 June 2021 and 30 June 2022 but is derived from those accounts. Statutory accounts for the year ended 30 June 2021 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2021 and the year ended 30 June 2022 both received an audit report which was unqualified and did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not include statements under Section 498 of the Companies Act 2006 respectively. The statutory accounts for the year ended 30 June 2022 will be delivered to the Registrar of Companies.

11. Other information

The Annual General Meeting of the Company will be held on 31 October 2022.

A copy of the Annual Report & Accounts for the year ended 30 June 2022 will shortly be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual Report & Accounts will also be available for download from the Company's website www.brownadvisory.com/basc

Enquiries:

FundRock Partners Limited, Company Secretary

Limor Gonen    Tel: +44 203 994 7129

ukfundscosec@apexfs.com

20 September 2022

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

END