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

Legal Entity Identifier: 549300HKKL9K1NY4TW55

Half yearly financial results for the six months ended 31 December 2022 (unaudited)

Financial highlights for the six months ended 31 December 2022

Ordinary share performance

* Alternative performance measure

Stephen White, Chairman, Brown Advisory US Smaller Companies PLC, said: "It was encouraging to see US smaller companies hold their own against their larger peers for the six months ended 31 December 2022. BASC's NAV per share made an absolute gain of 5.8%, which is a welcome achievement after the setback in markets during the prior financial year and compares favourably with the 4.6% gain in the benchmark. There are grounds for believing the US peak in inflation has now been seen, meaning the path towards lower interest rates should become evident. This will favour US equities again and, most likely, US smaller companies given their sensitivity to the domestic economy and their attractive valuations. We remain confident that our Portfolio Manager has the firepower and will take advantage of any market opportunities as they present themselves." 

Chris Berrier, Portfolio Manager, Brown Advisory US Smaller Companies PLC, said: "During the period, stock selection was by far the largest positive contributor to returns and enabled our more growth-oriented portfolio to outperform its core benchmark. Although 2022 was a challenging year, there is a silver lining as small-caps are now trading below their historical average valuation levels and look particularly compelling compared to large-cap peers. Furthermore, after multiple years of abnormal lower-quality company outperformance, we are encouraged to see a regime shift to higher-quality entities which would be a welcome change, turning a strategy headwind into a potential tailwind. While we believe that the set-up for small-caps has improved, our outlook is for continued volatility as we move into an uncertain 2023 across a number of dimensions, but we will nonetheless strive to take advantage of market swings to drive sound, risk-adjusted returns in the years to come."

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Chairman's statement

Dear Fellow Shareholder

I am pleased to report that for the six months ended 31 December 2022, your Company's net asset value (NAV) per share rose from 1303.87p to 1379.75p, an increase of 5.8%. This absolute gain is a welcome achievement after the setback in markets during the Company's prior financial year. It also compares favourably with the 4.6% gain in the Company's benchmark, the sterling adjusted Russell 2000 Total Return index, over the same period. Furthermore, it was encouraging to see US smaller companies, after a lengthy period of relative underperformance, once again holding their own against their larger US peers, notably the S&P 500 and the Nasdaq.

Over the six months, the Company's share price rose from 1105.00p to 1185.00p. This resulted in a small narrowing of the discount from 15.3% to 14.1%. No shares were bought back during the period under review.

Market Review

Equity markets worldwide began the period under review on an unsettled note, having fallen sharply in the six months before, and the US smaller company segment was no exception.

During the first half of 2022, Russia's unexpected invasion of Ukraine, an ensuing surge in inflation as energy and other commodity prices soared, and an abrupt change in monetary policy by the Federal Reserve as it pushed up interest rates aggressively to combat inflation and regain credibility, had all weighed on markets, with major declines seen in both equity and bond prices.

Having reached their low point in the early summer, US equity markets started to pick up again as news on the domestic economy and the corporate sector proved generally supportive and hopes grew that the Federal Reserve might soon pivot its stance if it was to prevent a major fall in business activity. However, such hopes were well and truly quashed at the end of the summer as the chairman of the Federal Reserve, Mr Jerome Powell, stressed at the Jackson Hole symposium that the need to get back to price stability would require maintaining a restrictive policy for some time. Share prices fell in response, returning to their summer lows. Thereafter, the US equity markets traded on lower volumes within a relatively narrow trading range, only edging a little higher towards the period end. The dollar was modestly stronger versus the pound over the half year and thus UK investors received small additional gains in Sterling. 

Within the US markets, as interest rates rose, the rotation continued away from the highly rated growth stocks, notably in technology, that had led the earlier bull market, to the more perceived value plays in areas such as energy and financials. Investors became less tolerant of earnings misses and of companies with no earnings, while merger and acquisition activity declined markedly. Smaller companies saw the same trends, but managed to do somewhat better than their larger peers as they benefited from some rotational return of interest away from the mega caps. Over the period, in US dollar terms the Russell 2000 achieved a total return of 3.9%, compared to 2.3% from the S&P 500 and -4.7% from the Nasdaq.

Portfolio Manager

More detailed coverage on the development of the US smaller company sector over the past six months and our activity and performance is included in the Portfolio Manager's review.

In October, the Board was pleased to make its first visit to Brown Advisory's offices in Baltimore to meet with Chris Berrier and his team in order to develop our understanding of their investment process and gain deeper knowledge of the portfolio. The visit was a success and gave us a much better insight into the investment operations in Baltimore. Between 31 March 2021, the date on which Brown Advisory took over the management of the portfolio, and 31 December 2022, which was a difficult period for markets, the decline in the Company's NAV was held at 5.2%, outperforming the benchmark, which fell by 7.0%.

Share Price and Discount

As mentioned in previous reports, it is the Board's policy to use 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 rose 7.2% from 1105.00p to 1185.00p. This helped to narrow the discount to NAV from 15.3% on 30 June 2022 to 14.1% on 31 December 2022. Given the continuing volatility in markets during the period under review and the fact that for much of the period the shares' discount traded within our tolerated range we decided not to buy back any shares.

As at 31 December 2022, the number of shares held in treasury was unchanged at 6,271,254 and the total number outside treasury at 11,952,159.

Gearing

Given the still troubled political and economic background and continuing market volatility, the Board was reluctant to take on gearing during the period. However, going forward and should conditions improve and the outlook brighten, the Board will review its decision, mindful that the ability to gear to enhance returns is one of the advantages of a closed-end vehicle.

Environment, 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 investee management teams 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

As part of our succession planning, I mentioned in my statement in last year's annual report that we had begun the search for a new director as audit chair designate to take over eventually from Lisa Booth. I was therefore very pleased to announce in September the appointment of Jasper Judd to the Board as a non-executive director. Jasper is a Chartered Accountant and currently a non-executive director and audit chair of JPMorgan Indian Investment Trust PLC and of Dunedin Income Growth Investment Trust PLC, as well as a non-executive director of Schroders Asian Total Return Investment Company. Previously, he had a long career in industry.

After a period of induction, Jasper has now taken on the role of audit chair from Lisa. I should like therefore to take this opportunity to thank Lisa for all her hard work and commitment as previous audit chair and for organising a very smooth handover.

Lastly and sadly, Tina Soderlund-Boley let us know in January that she had accepted a position at Slättö Förvaltning AB which had arisen unexpectedly. The Board considered the time commitments required by this role and agreed that Tina would stand down once a replacement non-executive director had been appointed. On behalf of the Board, I would like to thank Tina for all her contribution to the Company over the past three years, particularly in marketing matters, and wish her every success in her new appointment.

Shareholder Communications

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

Outlook

Although it is good to see equity markets regaining some ground this year after a very dismal 2022, they still face many headwinds. The Russia/Ukraine war continues to drag on with no signs of resolution, but ever-present risks of escalation. Growth is slowing in most developed economies with a possibility that some of them will fall into recession at some stage this year. Inflation in goods and services remains high and this, coupled with tight labour markets, puts corporate margins at risk. Finally, and most importantly, the era of low interest rates and low bond yields and an accommodative Federal Reserve has come to an end. The US central bank is determined not only to bring inflation back towards its sustained 2.0% target, but to be seen to be back in control. Interest rates seem likely to rise further and stay high for as long as need be. While these factors remain in place, markets might find it difficult to make much headway and could continue to fluctuate within the trading range set over the past six months.

Looking further out, however, we have cause to be more optimistic. There are grounds for believing that the peak in inflation in the US has now been seen. The latest monthly figures have been trending lower, the prices of energy and many commodities are back to near their pre-war levels, supplies are less scarce and falling demand is eroding many companies' pricing power. Should this be the case, and eventually acknowledged by the monetary authorities, the path towards lower interest rates should become evident, and any recession in the US might then be more modest. Such a scenario would favour US equities again, and most likely US smaller companies given their sensitivity to the domestic economy, their attractive valuations and their underperformance relative to their larger peers over the past few years. With cash on hand and the ability to gear, our Portfolio Manager has the skills and firepower to take advantage of any market opportunities in the meantime.   

Stephen White

Chairman

15 February 2023

Portfolio Manager's review

During the six-month period ended 31 December 2022, the NAV per share of the Company rose by 5.8%. This compares to an increase of 4.6% in the Company's benchmark, the sterling adjusted Russell 2000 Total Return Index. The favourable relative results were driven by stock selection. Our team continues to assess our opportunity set regularly as we operate during a time of heightened volatility in both the macroeconomic and the equity market backdrops. We know that we have limited ability to predict the future, but we certainly attempt to prepare for it.

As a reminder to our Shareholders, even though our stated benchmark is the sterling adjusted Russell 2000 Total Return Index, our strategy, in composition, tends to be a bit more growth-oriented. This stems from our philosophy to harness the power of compounding. We generally seek out businesses that possess the ability to scale into much larger organizations over a multi-year time frame. Our "3G" (durable Growth, sound Governance and scalable Go-to-market strategies) investment framework is utilized to centre our analytical team's attention on these unique, long-term investments. Based on the company characteristics we desire, the average company in our portfolio is typically of above average "quality" when compared to the average small-cap business. When we pair this aspect of the strategy with an attempt to drive adequate diversification and maintain a valuation discipline, we have historically been able to mitigate some of the downside risk of investing in the small-cap asset class. To summarize - in American football terms - we play offense with our security selection and defense with our portfolio architecture.

Looking back at the trailing six-month period, it was a nice reprieve from the very challenging equity market experienced in the first half of 2022. Although small-caps finished nicely above their 52-week lows, it was still a punishing year. However, there is a silver lining. Small-cap stocks are now trading below their historical average valuation level and look particularly compelling when compared to their large-cap peers. In addition, it is no secret that many of the mega-cap companies have been experiencing difficult times - a factor that typically helps the return prospects of smaller companies. Furthermore, at the portfolio level, we are very encouraged that after multiple years of abnormal lower-quality company outperformance, we are seeing a regime shift to higher-quality entities. Per our comments above, this would be a welcome macro-economic change, turning a strategy headwind into a potential tailwind.

Our optimism regarding the potential for perhaps some enduring leadership for smaller caps is not without acknowledging the volatile and uncertain world we inhabit. While valuations are lower, a slowing macroeconomic environment is likely to pressure future earnings, making close scrutiny of company fundamentals essential. At present, we are constantly sifting through top-down and bottom-up information to attempt to better understand the prospects for our holdings in 2023 and beyond. We are also looking back at our mistakes of the past six months in the hope of improving ourselves as investors as we strive to improve both our relative and absolute results in the years to come. 

In order to shed some light on recent results, let's first examine our high-level attribution. Stock selection was, by far, the largest positive contributor to returns. At the sector level, we witnessed an outsized gain coming from the information technology sector, while consumer discretionary weighed on results. Over the long-term, we expect our idiosyncratic bets to drive most of our outperformance and we certainly hope to achieve a balanced contribution across sectors.

Since our strategy is driven from the bottom-up, let's highlight a few of the major contributors and detractors for the period. Please keep in mind that, at times, the small-cap space can be volatile. Thus, when we examine the quarterly, semi-annual or annual performance of our holdings, we are mostly concerned with how their fundamental results are tracking against our original investment thesis. We strive to prudently let our winners run and consistently cull our losers from the portfolio.

During the period, our top three contributors came from multiple sectors. EVO Payments (EVOP), a merchant acquirer and our largest holding, rose nearly 44% on its proposed acquisition by Global Payments. ChampionX Corporation (CHX), a specialty chemical company operating in the oil and gas space and a recent addition to the portfolio, gained nearly 47% as an improved outlook for growth and margins catalysed the stock off of a relatively low valuation. Finally, Casey's General Store, a long-term holding operating in the convenience store industry, continued its march higher, rising nearly 22% on solid in-store performance and highly resilient fuel margins.

On the negative side of the ledger, our bottom three stocks were down about 30% on average. In healthcare, agilon health inc. (AGL) is a newly public company focused on value-based care, predominantly aimed at the Medicare Advantage population. While we believe the company is tracking well against our thesis, some of its peers have struggled, making investors question the steep projected improvement in cash flow for the next few years. Angi Inc. (ANGI), the leading online marketplace for residential services, was negatively impacted by the sharp rise in interest rates, prompting a slowdown in certain of its home services categories. We believe that under a new CEO the company should improve its profitability in 2023, enabling a bounce in the share price off depressed levels. Finally, and most surprisingly, Bright Horizons Family Solutions Inc. (BFAM), a position we have held for a long time in the child and educational services space, failed to show its historical resilience and predictability due to labour shortages that slowed the trajectory of financial improvement coming out of COVID-19. While we believe underlying demand remains strong, it certainly has taken longer than originally anticipated for the company to return and eclipse prior highs in earnings and free cash flow.

Clearly, as you can see from the above, we were not perfect over the trailing six months. However, overall stock selection was strong and enabled a more growth-oriented portfolio to outperform its core benchmark. While we are pleased with this result and encouraged that the set-up for small-cap equities has improved, our outlook is for continued volatility as we move into a highly uncertain environment in 2023 across a number of dimensions. Against this backdrop, we will strive to leverage our knowledge of the small-cap universe to take advantage of the wild mood swings of Mr. Market with the goal of driving sound, risk-adjusted returns for our shareholders in the years to come.

Brown Advisory LLC

Portfolio Manager

15 February 2023

Environmental, Social and Governance (ESG) Report

Overview of Brown Advisory's commitment to sustainable investing

Brown Advisory has a long history of serving clients focused on sustainable investing and we are deeply committed to this space.

We believe that sustainable investing is smart investing - it's a potential path to investment performance, a way to reflect your values, an opportunity to make an impact on the world. We clarify the principles, philosophy and processes that guide our sustainable investing work in our Institutional  Sustainable Investing Policy.

We think differently about how ESG factors can drive investment results in that we believe ESG factors are an important element in identifying investment opportunities that can outperform over the long term. For many of our strategies, we conduct proprietary ESG research across both equity and fixed income sectors, while also leveraging available quantitative tools and third party ESG research, as appropriate. There is still a shortage of meaningful ESG data in the market. Therefore, for those 'sustainable' strategies on our platform, it is crucial to do our own fundamental research in an effort to understand the impact of our investments, both financially and sustainably.

Brown Advisory's portfolio managers use this research to various degrees, with those strategies on our sustainable investing platform, fully integrating this research into their investment decision-making process.

We believe our approach to sustainable investing is comprehensive, rigorous and based on our ability to evaluate a broad range of sectors. Importantly, our deep ESG experience stems from a decade-plus track record coupled with a granular methodology of analysing individual companies and other issuers. Together, we believe these foundations enable well-informed assessments of ESG-related risks and sustainable opportunities. We aim to deliver a wide range of equity and fixed income solutions to our clients, with many solutions focusing on integrating fundamental and ESG research in a manner that we believe improves our investment decisions and leads to better performance over time.

Team

Brown Advisory has a  team of colleagues who are wholly or largely dedicated to our sustainable investing practice. Several of these colleagues form part of our ESG Research Team, which consists predominantly of ESG equity research analysts and ESG fixed income research analysts. Our ESG research analysts are a core component of the firm's broader equity and fixed income investment research team. They work together across asset classes to develop overarching ESG research tools, and to provide research coverage of overlapping portfolio names that are held or are being considered for both equity and fixed income portfolios. At the same time, the equity and fixed income ESG analysts are fully integrated members of the research teams for their respective asset classes, working closely with fundamental analysts and portfolio managers to guide portfolio decisions for strategies making use of the firm's ESG research tools. We believe this approach helps us to maintain consistent standards across asset classes while also seeking to embed ESG research deeply within the decision-making process for sustainable investments.

Brown Advisory also has a Sustainable Investing Advisory Board. This board was developed to help us focus on our business strategy as we build out our sustainable investing capabilities beyond our ESG focused strategies. Among the strategic guidance that this board provides, they advise our investment teams as to how they might consider incorporating ESG factors into investment decisions in ways that have clear fundamental benefits. The board includes members from Brown Advisory, as well as external sustainable investing experts.

ESG research integration into the investment process

Brown Advisory's investment philosophy is rooted in the belief that bottom-up fundamental research can drive long-term outperformance, and this belief supports the Brown Advisory US Smaller Companies portfolio's commitment to ESG research as well. We believe that there are elements of ESG research that are inherent to fundamental analysis and, whenever relevant, consider these in investment decisions.

The "3G" investment filter that the portfolio managers employ within the Brown Advisory US Smaller Companies portfolio seeks the following factors when evaluating new investments: growth, governance, and go-to-market strategy. The governance factors that companies should possess include a capable and shareholder-friendly management team, a diverse and appropriate Board structure, well-structured and aligned incentives, and more. The portfolio managers invest in companies where management teams take all risks to fundamental performance seriously, including any material environmental or social risks. Furthermore, the portfolio managers are provided access to Brown Advisory's ESG research, tools and third-party ESG research. The portfolio managers utilise these tools to varying degrees to assist with investment decision-making. For example, the portfolio managers may request that our ESG research analysts conduct an ESG assessment of a company or assist with engagement and proxy voting related to ESG topics. In particular, ESG research analysts provide guidance to the Portfolio Manager on how to vote on shareholder proposals. The portfolio managers are also provided with a summary of their portfolio from an ESG perspective on a quarterly basis, including identifying any significant ESG risks or controversies. These reports ensure the portfolio managers maintain awareness of how the strategy is positioned from an ESG perspective. The portfolio's output has often met ESG standards for our clients. The Company does not, however, manage its portfolio to a specific ESG policy.

Brown Advisory LLC

Portfolio Manager

15 February 2023

Twenty largest holdings as at 31 December 2022

The value of the twenty largest equity holdings represents £70.9 million (30 June 2022: £70.2 million) and 46.3% (30 June 2022: 47.5%) of the Company's total investments.

As at 30 June 2022 and 31 December 2022, none of the Company's assets were invested in the securities of other listed closed-ended investment companies.

Interim management report

Related party transactions

During the first six months of the current financial year no transactions with related parties have taken place which have materially affected the financial position or performance of the Company. Details of related party transactions are contained in the Annual Report & Accounts for the year ended 30 June 2022.

Principal and emerging risks and uncertainties

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 it aims to seek capital growth. 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. Other key risks faced by the Company relate to liquidity risk, the discount to net asset value, regulatory risk, credit and counterparty risk, loss of key personnel, and operational and financial risks.

Further details of the principal and emerging risks and uncertainties associated with the Company's
business are set out in the Annual Report & Accounts for the year ended 30 June 2022. In the view of the Board, these principal and emerging risks and uncertainties continue to apply and they are constantly under review. 

Going concern

The Half Yearly Financial Report has been prepared on a going concern basis. The Directors consider that this is the appropriate basis as they have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future. In considering this, the Directors
took into account the Company's investment objective, risk management policies and capital management policies, the diversified portfolio of readily realisable securities which can be used
to meet short-term funding commitments and the ability of the Company to meet all of its liabilities
and ongoing expenses.

Directors' responsibility statement

The Directors confirm to the best of their knowledge that:

(a) the condensed set of financial statements, prepared in accordance with the applicable set of
accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit
or loss of the Company at, or, as applicable, for the period ended 31 December 2022.

(b) the Chairman's statement, the Portfolio Manager's review and the interim management
report include a fair review of the information required by Disclosure Guidance and Transparency
Rule 4.2.7R; and

(c) the interim management report includes a fair review of the information required by Disclosure
Guidance and Transparency Rule 4.2.8R on related party transactions.

The Half Yearly Financial Report has not been audited or reviewed by the Company's auditors.

For and on behalf of the Board

Stephen White

Chairman

15 February 2023

Income statement

For the six months ended 31 December 2022 (unaudited)

The total column of this statement is the profit and loss account of the Company prepared in accordance with UK Generally Accepted Accounting Practice ('UK GAAP').

The 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies.

All items in the above statement derive from continuing operations.

No operations were acquired or discontinued in the period.

The financial information does not constitute 'accounts' as defined in section 434 of the Companies Act 2006.

Statement of financial position

As at 31 December 2022 (unaudited)

* Under the Company's Articles of Association any dividends may be distributed only from the revenue element of retained earnings and, as at 31 December 2022, there were no available earnings of this type.

Statement of changes in equity

For the six months ended 31 December 2022 (unaudited)

Notes to the accounts

For the six months to 31 December 2022

1.   Accounting policies

The accounting policies applied for the condensed financial statements are as set out in the Company's Annual Report & Accounts for the year ended 30 June 2022. They have been applied consistently during the period ended 31 December 2022.

FRS 104, 'Interim Financial Reporting', issued by the FRC in March 2015 has been applied in preparing the financial statements included in this half yearly report.

Basis of accounting

The accounts of the Company are prepared on a going concern basis under the historical cost convention, modified to include fixed asset investments at fair value through profit or loss and in accordance with the Companies Act 2006, UK GAAP 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 November 2014 and updated in April 2021.

The functional and reporting currency of the Company is pounds sterling because that is the currency of the primary economic environment in which the Company operates.

In accordance with the SORP, the Income Statement has been analysed between a revenue account (dealing with items of a revenue nature) and a capital account (relating to items of a capital nature). Revenue returns include, but are not limited to, dividend income, operating expenses and tax. Net revenue returns are allocated via the revenue account to the retained earnings, out of which dividend payments may be made. Capital returns include, but are not limited to, profits and losses on the disposal and revaluation of fixed asset investments and currency profits and losses on cash and borrowings. Net capital returns may not be distributed by way of dividend and are allocated via the capital account to the retained earnings.

2.   Gains on investments held at fair value through profit or loss

3.   Return per Ordinary share

4.   Transaction costs

During the period, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:

5.   Comparative information

The financial information contained in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the six months to 31 December 2022 and 31 December 2021 has not been audited.

The information for the year ended 30 June 2022 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 30 June 2022 have been filed with Companies House. The report of the auditors on those accounts contained no qualification or statement under section 498(2) or (3) of the Companies Act 2006.

6.   Net asset value per Ordinary share

The net asset value per Ordinary share as at 31 December 2022, calculated in accordance with the Articles of Association, was as follows:

Net asset value per Ordinary share on the balance sheet is based on net assets of £164,910,000 (30 June 2022: £155,840,000) and on 11,952,159 (30 June 2022: 11,952,159) Ordinary shares, being the number of Ordinary shares in issue at the end of the period.

7.   Fair valuation of investments

The fair value hierarchy analysis for investments held at fair value at the period end is as follows:

Financial instruments include fixed asset investments, derivative assets and liabilities.

Accounting standards recognise a hierarchy of fair value measurements for financial instruments which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The classification of financial instruments depends on the lowest significant applicable input, as follows:

Level 1 - Unadjusted, fully accessible and current quoted prices in active markets for identical assets or liabilities. Included within this category are investments listed on any recognised stock exchange.

Level 2 - Quoted prices for similar assets or liabilities, or other directly or indirectly observable inputs which exist for the duration of the period of investment. Examples of such instruments would be those for which the quoted price has been recently suspended, forward exchange contracts and certain other derivative instruments.

Level 3 - External inputs are unobservable. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instruments. Included within this category are unquoted investments.

8.   Retained earnings

The table below shows the movement in the retained earnings analysed between revenue and capital items:

9.   Related parties and transactions with the manager

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

The management fee has been 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 investment management fee payable to FundRock for the period 1 July 2022 to 31 December 2022 was £583,000. For the period 1 July 2021 to 31 December 2021 the fee payable was £627,000.

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

There are no transactions with the directors other than the remuneration paid to the directors as disclosed in the Directors' Remuneration Report on pages 45 to 48 of the 2022 Annual Report & Accounts and as set out in Note 5 to the Accounts on page 65 and the beneficial interests of the directors in the ordinary shares of the Company as disclosed on page 47 of the 2022 Annual Report & Accounts.

Availability of Half Yearly Financial Report

The Half Yearly Financial Report will shortly be available on the Company's website www.brownadvisory.com/basc

A copy of the Half Yearly Financial Report will also be submitted to the National Storage Mechanism and will soon be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

End