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

Legal Entity Identifier: 549300HKKL9K1NY4TW55

Annual Financial Results for the year ended 30 June 2023

Financial Highlights for the year ended 30 June 2023

Ordinary Share Performance

Ten year record

Contact:

Introduction to Brown Advisory US Smaller Companies PLC

What does Brown Advisory US Smaller Companies PLC (the "Company") do?

The Company aims to achieve long-term capital growth by investing in a diversified portfolio of quoted US smaller and medium-sized companies.

Who is it suitable for?

Brown Advisory manages the Company's portfolio on behalf of individual investors and wealth managers. The Company provides a cost-effective way to access the large, entrepreneurial group of smaller companies in the world's largest economy - the United States of America. For individuals who are willing to invest over the long-term, these companies often outperform their large-cap peers so make for a compelling investment opportunity.

How is Brown Advisory US Smaller Companies invested?

Managed by Chris Berrier and George Sakellaris, CFA, of the US-based investment manager, Brown Advisory, the Company focuses on businesses with strong growth potential, scalable go-to-market strategies and well-aligned management and shareholder interests. The resulting portfolio is diversified across sectors, business models and economic cycles.

The power of compounding - the managers recognise the potential of compounding in order to achieve long-term, risk-adjusted returns. Therefore, they seek to invest in companies that present above average capital growth rates.

Harnessing their local knowledge and innovative research approach, they aim to capitalise on market inefficiencies in valuations and invest in businesses that exhibit what they refer to as "3G" qualities.

Out of a universe of over 2,000 companies, this process reduces the available market to around 500  companies, while the portfolio itself is typically made up of 70-80 of these companies.

Benchmark agnostic - while the Company's performance is measured against the sterling adjusted Russell 2000 Total Return Index, the managers are not beholden to this benchmark - individual sector and security weightings are driven by their rigorous stock selection process.

Why invest in US smaller companies?

·      US-based smaller companies include an exciting and dynamic group of growing businesses that typically demonstrate high innovation and strong entrepreneurial cultures.

·      Over half of global smaller companies - more than 2,000 companies - are listed in the US, creating a huge opportunity.

·      US smaller companies offer a deep and liquid market but are typically not as well covered by sell-side research analysts as their larger counterparts, creating inefficiencies and missed opportunities that Brown Advisory aims to exploit.

·      A US stock market listing means there are high governance hurdles relative to some of their global peers, considerably reducing the risk profile of US smaller companies.

Why have the directors of Brown Advisory US Smaller Companies PLC appointed Brown Advisory as the Portfolio Manager?

Chris Berrier and George Sakellaris, CFA, the portfolio leads between them have more than 44 years' experience investing in US small and mid-caps and are supported by a large team of fundamental, investigative and environmental, social and governance (ESG) analysts. Based in the US, the team have direct access to the companies in which they invest.

Brown Advisory has more than 25 years' experience of investing in small and medium-sized companies in the US and within its broader US Small-Cap Growth strategy it manages $6.6bn. The firm benefits from an extensive network of venture capital, private equity and corporate relationships, which helps provide a strong overview of the broader small to mid-sized company market.

Brown Advisory believes that disciplined, bottom-up research, coupled with teamwork and the free exchange of ideas amongst colleagues, are the keys to achieving long-term outperformance. The combination of its investment philosophy and its client-first culture were important factors in the Board's decision to appoint Brown Advisory as the Company's Portfolio Manager.

Chairman's Statement

Dear Fellow Shareholder

I am pleased to report that for the year ended 30 June 2023, your Company's net asset value (NAV) per share rose from 1,303.9p to 1.431.9p, an increase of 9.8%. This compares favourably with the 7.5% gain in the Company's benchmark, the sterling adjusted Russell 2000 Total Return Index, over the same period. It was encouraging to see the US smaller company sector generate a positive return again after a very disappointing performance in the previous year, even if it still lagged those of its larger peers, the S&P500 and the tech-heavy Nasdaq.

Over the twelve months under review, the Company's share price rose from 1,105.00p to 1,220.00p, an increase of 10.4%. This resulted in a small narrowing of the discount to NAV from 15.3% on 30 June 2022 to 14.8% on 30 June 2023. No shares were bought in or issued during the year, as touched on below.

Market Review

In the first nine months of our financial year, US equity markets lost ground. The geopolitical background worsened as China/US relations deteriorated and the war in Ukraine ground on with no signs of resolution. Supply chain problems remained an issue, while at home in the US the inflation numbers continued to come in stubbornly above expectations. This persuaded the Federal Reserve to stick firmly to its policy of raising interest rates to rein in inflation. Despite the Federal Reserve's actions, the US economy continued to hold up well, supported by better- than-expected employment numbers and by the willingness of consumers to spend savings accumulated during the pandemic. Corporate results were also largely positive. Unsurprisingly, with interest rates rising sharply, merger and acquisition activity fell off, and with many investors preferring to sit on the side-lines and merely add to their money market funds, volumes on the exchanges dwindled. For much of this period, as interest rates rose there was some rotation within the markets back towards more 'value' stocks and away from the highly rated names, notably those in tech, that had led the earlier bull market. The smaller company asset class followed a similar trend.

However, the mood changed in the last four months of our financial year as a potential financial crisis erupted in the regional banks. With rising interest rates encouraging depositors to look elsewhere for higher yields, several regional banks suffered significant outflows of liquidity, which could only be met through realising their loan and bond portfolios at a loss. Most notable of these was Silicon Valley Bank which effectively collapsed. Only through swift action by the authorities with injections of liquidity and takeovers by stronger peers was the turmoil brought to heel. Given the potential risks to the economy from such a situation, bond yields eased again as investors speculated on whether the peak in rates was nearing, despite continuing Federal Reserve rhetoric to the contrary. With hopes of an imminent peak in interest rates and news on the economy remaining generally positive, the stock market enjoyed another lift in the run up to our financial year end. That said, the major winners were again the narrow group of technology mega-caps that had led the market before, rather than the broader market or the smaller company asset class.

Over the year, in US dollar terms, the Russell 2000 Index returned 12.3%, the S&P 500 returned 19.6% and the Nasdaq Composite returned 26.1%. Although the pound suffered a weak patch last autumn at the time of the unsettling changes in British Prime Minister, it recovered thereafter to end the financial year slightly higher, thus eroding some of the equity market gains for sterling-based investors.

Portfolio Manager and Continuation Vote

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

As I mentioned in our most recent half yearly report, the Board was pleased in October to visit the Baltimore offices of our Portfolio Manager, Brown Advisory, and to review in detail with Chris Berrier and his team their investment process and strengthen our knowledge of the portfolio. The visit gave us an enhanced 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 30 June 2023, a mixed period for markets, the decline in the Company's NAV was held at 1.6%, compared to a negative return of 4.9% from the Company's benchmark over the same period.

In accordance with the three-year cycle prescribed in the Company's Articles of Association, there will be a continuation vote at this year's Annual General Meeting (AGM). The Board has considered the Company's investment remit, strategy, performance and ongoing viability and believes that the Company's offering remains attractive. Accordingly, the Board strongly recommends that shareholders vote in favour of the continuation of the Company in its present form, which as fellow shareholders they will be doing themselves.

Revenue and Capital Returns

The net gain per Ordinary share was 128.07p, split (6.82p) to Revenue and 134.89p to Capital. Dividend income was higher as some companies raised pay-outs again as confidence returned and interest income benefited from the rise in rates. With management expenses broadly unchanged, the net revenue loss was thus marginally lower. 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

After careful consideration, the Board has amended the Company's share buyback policy that has been in place for several years. The revised policy will see the Board committed to using share buybacks with the aim of reducing discount volatility and working to reduce any discount should it become significantly wider than those of similar investment trusts. It believes this to be in shareholders' interests. In determining whether to buy back shares, the Board will consider, amongst other factors, and at its discretion, the size of the Company, general market conditions and sentiment, the liquidity in the shares and discounts in the investment trust sector overall.

Alongside this share buyback policy, the Board believes that the Company's discount will also be driven by demand for the Company's shares, reflecting its long-term investment performance, its relevance to investors, the appropriate marketing of the Company and general market conditions.

Given the continuing volatility in markets during the period under review and to allow further time for our Portfolio Manager to build and market its performance record, we considered it inappropriate to buy in any shares in this period.

As at 30 June 2023, the number of shares held in treasury was unchanged at 6,271,254 and the total number in public hands was also unchanged at 11,952,159.

Gearing

As an investment trust, the Company may use gearing for investment purposes to enhance returns. However, over the past year the Board, taking into consideration the views of the Portfolio Manager regarding investment opportunities and outlook, did not feel it appropriate to deploy gearing given the continuing unsettled geopolitical and economic background and resultant market volatility. Should conditions improve and the outlook become more certain, the Board will review its decision to gear, as it is mindful that the ability to gear to enhance returns is considered one of the advantages of a closed-end vehicle.

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 it uses its regular meetings with management to discuss and challenge them 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

In our half yearly report, I noted that we would be looking for a replacement non-executive director for Tina Soderlund-Boley, who had accepted a senior position at a Swedish real estate investment company. In view of the time commitments required by this role, Tina decided to step down from the Board once a replacement non-executive director had been appointed. This she did at the end of June. I should like to thank Tina for her outstanding contribution to the Company over the past three years and wish her every success for the future.

I was therefore pleased to announce in March that, with the help of search firm Nurole Limited, we had appointed Jane Routledge as a replacement independent non-executive director with effect from 1 April. Jane is a non-executive director of M&G Credit Income Investment Trust plc, having previously had a long career in the investment management sector, holding several senior marketing positions, including at Schroders, Invesco, Hermes and Seven Investment Management. Her considerable marketing knowledge and experience in this field will be of great use to the Board.

As a result of Tina's resignation, the Board has revisited its succession planning arrangements. Previously, the Board had anticipated that Tina would replace Clive Parritt as Senior Independent Director (SID) at this year's AGM when Clive was due to retire. The Board believes that Jane Routledge has all the necessary skills for this role, and she has agreed that, after allowing for a period of getting to know the Company, she will become SID on 1 April 2024.

In view of this, we have asked Clive Parritt to stay on the Board for a further period in order to help smooth the transition. He will retire during 2024 as Jane takes on the role of SID. Although a long-standing Board member, we deem Clive to be independent and the Company has benefited hugely from his continuity, knowledge and experience. The Board believes that it is in the interests of shareholders that he be re-elected for this period.

In February, Jasper Judd took on the role of audit chair from Lisa Booth. My thanks again to Lisa for her work as previous audit chair and her help in organising a very smooth handover, as well as to Jasper for taking on his new role. All five directors will be representing themselves at the AGM.

Finally, as part of our refreshment of the Board and ahead of next year when both Clive and Lisa will be stepping down, we will begin a new search for a fourth independent non-executive director. Going forward, we expect the size of the Board to oscillate between four and five members.

The Board is aware of the FCA's Diversity and Inclusion Policy and notes and supports their targets. Accordingly, two out of the five non- executive directors presenting themselves at the forthcoming AGM are female, while one of the three senior positions will be occupied by a female when Jane becomes Senior Independent Director early next year. As the Board going forward will only comprise four to five members, it may not be big enough for us to ensure that at least one member will be from a minority ethnic background. That said, we look to create and

maintain a Board that has the correct mix of skills, diversity of thought and a collegiate culture drawn from as wide a range of sources as possible.

Annual General Meeting

This year's AGM will be held on Monday, 6 November 2023 at 2.00pm at the offices of Brown Advisory, 18 Hanover Square, London W1S 1JY. It will include a short presentation via video-link by Chris Berrier, covering the performance of the Company over the past year as well as his 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

So far in 2023, both the US economy and the US stock market have defied expectations on the upside. Despite major headwinds comprising a huge jump in interest rates, persistent inflation, the depletion of pandemic era savings, concerning geopolitical tensions and a minor regional banking crisis, the US consumer has remained resilient and continued to drive the American economy.

As a result, the recession forecast by many a year ago has failed so far to materialise. The stock market has responded positively, and it has been supported further by hopes that the peak in interest rates is within sight.

Given the market's rise to date, some setback should not, of course, be ruled out. While the Federal Reserve may have paused its rate increases in June, this was done merely in order to take stock and assess the impact so far. With the resilience of the economy and still high inflation numbers, the trajectory for interest rates remains upwards in view of the Federal Reserve's determination to bring inflation back into its target range. The difficulty for the Federal Reserve is in determining at what point the rise in rates will achieve this, without putting the economy severely at risk. With the Federal Reserve putting inflation restraint before economic activity, there is a risk that investors underestimate the extent and duration of tightening potentially to come.

At the same time, the geopolitical concerns remain, the economy may slow if the consumer finally becomes more cautious and corporate earnings may be impacted.

As we look further out, we become more optimistic. We expect the Federal Reserve's tough medicine to work and for the inflation numbers as we enter the autumn to trend lower, allowing interest rates to ease back too. Although possibly somewhat softer, we still expect the domestic US economy to hold its own, with demand supported by recent wage growth and still high levels of employment. We see this as a generally favourable background for the US smaller company sector which should again draw investors given its attractive valuations and extended period of underperformance relative to its larger peers.

Any period of weakness in the short-term will thus be welcome and offer our Portfolio Manager the opportunity to add to positions at attractive prices, having cash on hand and the ability to gear.

Stephen White

15 September 2023

Portfolio Manager's Review

Performance Review

During the year ended 30 June 2023, the Company's NAV increased by 9.8%, compared to the benchmark Russell 2000 Index return of 7.5%.

Overall, we are pleased with the Company's absolute and relative returns over the last financial year, representing a solid rebound from the challenging market conditions experienced toward the end of 2021 and most of 2022. Our emphasis on quality has certainly helped results more recently. However, we see this condition as temporary considering current economic and market dynamics. If current conditions persist, we think there could be an increased reliance on idiosyncratic successes to drive relative outperformance. Nonetheless, our overall approach remains steady as we continue to wait patiently for opportunities to introduce new ideas and increase our investment in a select group of existing portfolio holdings.

Portfolio Review

For the twelve-month period, the largest absolute contributors to the Company's overall performance were the information technology, healthcare and industrials sectors. However, on a relative basis, the financials sector was the primary driver as our eclectic list of holdings outperformed the bank-laden benchmark. Consumer discretionary and industrials saw relative weakness due to their comparative lack of cyclicality.

At the individual stock level, EVO Payments, ChampionX Corporation and Workiva were the strongest contributors. EVO Payments Inc, which operates a global merchant acquirer and payment processor servicing company, entered into a definitive agreement to be acquired by Global Payments for $34 per share in an all- cash transaction. ChampionX Corporation is a chemicals company specializing in delivering solutions that optimize the extraction and drilling of oil and gas. The company continues to benefit from the positive energy cycle, breathing new life into a new capital deployment strategy that includes both dividends and share repurchases - at the end of 2022 the company committed to returning more than 60% of free cash flow to shareholders going forward. Workiva Inc. provides a cloud-based software platform that enables organisations to collect and analyse data for compliance and management reporting. The company is seeing continued improvement in profitability both in the short and long-term. There have also been rumours that the company may be garnering interest from private equity suitors.

The negative side of the ledger included Clarus Corporation, Azenta Inc. and BlackLine Inc. Clarus Corporation, a manufacturer of outdoor sporting equipment, was the victim of inventory rationalization at several national account customers, which prompted them to lower their forecast of future profits. Azenta Inc. provides gene sequencing and gene synthesis services and develops automated ultra-cold storage systems. The company lowered its full year profitability guidance due to a weaker than anticipated rebound in what we view as a highly profitable product category. BlackLine Inc. provides cloud- based solutions for accounting and finance operations. It has recently announced a CEO transition that has prompted investor concerns around its product roadmap and go-to-market strategy.

There were roughly an equal number of additions and deletions to the portfolio over the twelve- month period. A substantial amount of the portfolio turnover was due to M&A activity and our desire to eliminate positions where our investment thesis appeared violated or we believed a poor risk/reward dynamic necessitated a redeployment of capital. For example, Biohaven Pharmaceutical Holdings, CMC Materials, EVO Payments, IAA Inc., ManTech International Corporation, and Terminex were all acquired. Catalent, Nevro Corp, and Progyny were situations that fell into the latter bucket. We were pleased that the team was able to re-deploy the vast majority of the proceeds into a diverse collection of businesses that we hope to own for the next several years.

A thought on investing

Investment management is a straightforward, yet challenging profession. Success hinges upon an empirically derived philosophy, a committed team with clear roles, a culture fostering open and honest communication, and decisive actions informed by collected data and evidence. Time, attention and energy should be allocated towards analysing and refining the investment process - the controllable aspect - rather than towards the outcomes. Learning and growth should be the focus of both investment successes and failures.

Unlike more predictable professions, where following certain procedures guarantees certain outcomes, investing demands similarly precise methods but success is never guaranteed. We would all prefer it to be straightforward.

Legendary NFL coach Bill Parcells once said, "You are what your record says you are." While football teams are judged by a season, investment teams should be assessed over an "investment cycle." A 3- to 5-year investment record represents a culmination of all the bottom-up capital allocation decisions made during this time. We make numerous decisions every day, guided by one primary thought: what potential action is most likely to benefit long-term returns? As such, we must always consider any factors that might distort or obscure our perspective.

Being aware of our human fallibility, we foster a collaborative investment-decision-making process. Each of us is influenced by several behavioural or cognitive biases such as anchoring, authority, confirmation, disposition effect, egocentricity, endowment effect, familiarity, framing, hindsight, loss aversion, mental accounting, narrative bias, overconfidence, recency, and survivorship.

Conclusion

"Toto, I've a feeling we're not in Kansas anymore." - Dorothy, The Wizard of Oz

Much like Dorothy's transition from Kansas to the fantastical Land of Oz, we too have been transported to a different world in the equity markets. The last decade has seen zero interest rate policy (ZIRP), a global pandemic, a surge in inflation and a dramatic policy reversal by the Federal Reserve. The advent of passive capital (index funds, ETFs, etc.) has further altered the structure of the stock market.

This journey has led to dramatic changes in investment sentiment, capital flows, and market leadership. Our portfolio's active share is high, which can cause significant shifts in short-term relative performance. Despite an interesting investment environment in the first half of 2023, our core elements have stood the test of time over the last 17+ years and will continue to guide us in the future. We anticipate volatility will remain prevalent and intend to leverage it to our advantage. We remain pleased with our long-term performance and will strive to continue to drive solid risk-adjusted returns going forward.

Portfolio Manager

Brown Advisory LLC

15 September 2023

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 2023 and the Directors anticipate that the Company will continue to operate in the same manner during the current financial year.

Gearing

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 apply its revised policy of buying back shares with the aim of reducing discount volatility and maintaining any discount such that it is not significantly wider than those of similar investment trusts. It believes this to be in shareholders' interests. In determining whether to buy back shares, the Board will consider, amongst other factors, and at its discretion, the size of the Company, general market conditions and sentiment, the liquidity in the shares and discounts in the investment trust sector overall.

The Directors had powers granted to them at the last Annual General Meeting ('AGM') held on 31 October 2022 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. No shares were bought back during the year under review.

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 2024 (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 2023 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, by 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, it considers the continuation vote will be approved by the shareholders.

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 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 Board, through the Audit and Risk Committee, carries out a regular review of the risk environment in which the Company operates, changes to the environment and individual risks. The Board also considers emerging risks which might affect the Company. During the year, the continued conflict in Ukraine and tensions between China and the US have created geopolitical uncertainties which have increased market risk and volatility.

There are a number of other risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has carried out a robust assessment of the Company's principal and emerging risks, which include those that would threaten its business model, future performance, solvency, liquidity or reputation.

The principal risks and uncertainties facing the Company at the current time, together with a description of the mitigating actions the Board has taken, are set out in the table below.

Directors

At 1 July 2023 the Board comprised two female and three 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 2023.

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, if any, 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 and Risk 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 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 financial statements 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.

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 2023.

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 upcoming 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 and Risk 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, and other third party service providers together with independent, external reviews where appropriate.

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

15 September 2023

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

15 September 2023

Income Statement

for the year ended 30 June 2023

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 2023

The financial statements were approved by the Board of Directors and signed on its behalf on 15 September 2023.

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 2023

Notes to the Accounts for the year ended 30 June 2023

1.   General information

Brown Advisory US Smaller Companies PLC (a Public Company Limited by shares) is an investment Company incorporated in the United Kingdom with a premium listing on the London Stock Exchange. The Company registration number is 02781968 and the registered office is 6th floor, 125 London Wall, London, EC2Y 5AS.

The Company conducts its affairs so as to qualify as an investment trust under the provisions of section 1158 of the Corporation Tax Act 2010.

The Company has qualified as an investment trust in respect of all relevant years up to and including the year ended 30 June 2023. Section 1158 was amended to allow the Company to seek approval of compliance in advance and for all subsequent financial years. The Company received such advance approval subject to it continuing to meet the relevant eligible conditions and ongoing requirements. The Company intends to conduct its affairs so as to enable it to comply with the requirements. Such approval exempts the Company from UK corporation tax on gains realised in the relevant year on its portfolio of fixed asset investments.

A summary of the accounting policies, all of which have been applied consistently throughout the period is set out below.

2.   Accounting policies

Basis of preparation

The financial statements for the year ended 30 June 2023 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 inJuly 2022.

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.

The Directors are of the opinion that the Company is engaged in a single segment of business activity, being investment business. Consequently, no business segmental reporting is required.

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 2023.

4.   Management fee  

5.   Other expenses  

6.   Ongoing charges  

7.   Taxation

(b) Factors affecting current tax (credit)/charge for the year

The tax assessed for the year is lower (2022: higher) than the standard rate of corporation tax for a company (20.50%) (2022: 19.00%). The differences are explained below:

Due to the Company's status as an investment trust and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

There is an unrecognised deferred tax asset of £5,461,000 (2022: £5,076,000) which relates to unutilised excess expenses. The deferred tax asset would only be recovered if the Company were to generate sufficient profits to utilise these expenses. It is considered too uncertain that this will occur and therefore, no deferred tax asset has been recognised.

8.   Net return/(loss) per Ordinary share

The return per Ordinary share figure is based on the net profit for the year of £15,307,432 (2022: Loss £25,412,443), and on 11,952,159 (2022: 11,955,536) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

The return per Ordinary share figure detailed above can be further analysed between revenue and capital, as below.

9.   Related parties and transactions with the Portfolio Manager and the AIFM

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 2023.

Transactions with the Portfolio Manager and the AIFM

FundRock Partners Limited is AIFM to the Company pursuant to an Alternative Investment Fund Management Agreement between FundRock Partners Limited and the Company. FundRock Partners Limited 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 Partners Limited 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 Partners Limited, 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 Partners Limited for the period from 1 July 2022 to 30 June 2023 was £1,172,000 (payable to FundRock Partners Limited for the period from 1 July 2021 to 30 June 2022: £1,192,000) with £298,000 outstanding as at 30 June 2023 (2022: £275,000).

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

10. Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments outstanding at 30 June 2023 (2022: nil).

11. Annual results

This Annual Results announcement does not constitute the Company's statutory accounts for the years ended 30 June 2022 and 30 June 2023 but is derived from those accounts. Statutory accounts for the year ended 30 June 2022 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2022 and the year ended 30 June 2023 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 2023 will be delivered to the Registrar of Companies.

12.  Other information

The Annual General Meeting of the Company will be held on 6 November 2023.

A copy of the Annual Report & Accounts for the year ended 30 June 2023 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

Inderpreet Kaur Bedi          Tel: +44 (0) 7766 081 197

ukfundscosec@apexfs.com

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