The Advisors' Inner Circle Fund II ANNUAL REPORT

108 Pages·2017·0.7 MB·English

Frost Family of Funds
A N N U A L R E P O R T
July 31, 2019
Frost Growth Equity Fund • Frost Value Equity Fund
Frost Mid Cap Equity Fund
Frost Total Return Bond Fund • Frost Credit Fund
Frost Low Dura(cid:2)on Bond Fund • Frost Municipal Bond Fund
Beginning on January 1, 2021, as permi(cid:3)ed by regula(cid:2)ons adopted by the Securi(cid:2)es and Exchange
Commission, paper copies of the Funds’ shareholder reports will no longer be sent by mail, unless
you specifically request paper copies of the reports from the Funds or from your financial intermediary,
such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be
no(cid:2)fied by mail each (cid:2)me a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this
change and you need not take any ac(cid:2)on. You may elect to receive shareholder reports and other
communica(cid:2)ons from the Funds electronically by contac(cid:2)ng your financial intermediary, or, if you are
a direct investor, by calling 1-877-71-FROST (1-877-713-7678).
You may elect to receive all future reports in paper free of charge. If you invest through a financial
intermediary, you can follow the instruc(cid:2)ons included with this disclosure, if applicable, or you can
contact your financial intermediary to inform it that you wish to con(cid:2)nue receiving paper copies of your
shareholder reports. If you invest directly with the Funds, you can inform the Funds that you wish to
con(cid:2)nue receiving paper copies of your shareholder reports by calling 1-877-71-FROST (1-877-713-7678).
Your elec(cid:2)on to receive reports in paper will apply to all funds held with your financial intermediary if you
invest through a financial intermediary or all Frost Funds if you invest directly with the Funds.
Investment Adviser:
Frost Investment Advisors, LLC
FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
TABLEOFCONTENTS
Page
Shareholders’Letter .................................................................................. 1
ManagementDiscussionandFundPerformance ............................................................ 3
SchedulesofInvestments .............................................................................. 24
StatementsofAssetsandLiabilities ...................................................................... 60
StatementsofOperations .............................................................................. 62
StatementsofChangesinNetAssets ..................................................................... 64
FinancialHighlights ................................................................................... 68
NotestoFinancialStatements .......................................................................... 71
ReportofIndependentRegisteredPublicAccountingFirm .................................................... 82
TrusteesandOfficersoftheFrostFundFamily ............................................................. 84
DisclosureofFundExpenses ............................................................................ 90
NoticetoShareholders ................................................................................ 92
BoardConsiderationsinApprovingtheAdvisoryAgreement .................................................. 93
ShareholderVotingResults ............................................................................. 95
The Funds file their complete schedule of investments of portfolio holdings with the Securities and Exchange Commission
(“Commission”) for the first and third quarters of each fiscal year on Form N-PORT within sixty days after period end. The
Funds’ Forms N-PORTare available on the Commission’s website at http://www.sec.gov,and may be reviewed and copied at
theCommission’sPublicReferenceRoominWashington,D.C.InformationontheoperationofthePublicReferenceRoommay
beobtainedbycalling1-800-SEC-0330.
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio
securities,aswellasinformationrelatingtohowtheFundsvotedproxiesrelatingtoportfoliosecuritiesduringthemostrecent
12-month period ended June 30, is available (i) without charge, upon request, by calling 1-877-71-FROST; and (ii) on the
Commission’swebsiteathttp://www.sec.gov.
FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
LETTERTOSHAREHOLDERS(Unaudited)
DearShareholders:
Overthepastfiscalyearwe’veseensomemarkethighsandlows,andIsuspectthebalanceof2019willproveequallyvexing.
Recall that investors began 2019 on the heels of a merry-less December drop in the markets. January through April saw this
quicklyreversed,butinvestorsweresurprisedagainbyabroad-basedselloffinMay.AndthenthemarketsreboundedinJune
andJuly,pushingtheS&P500Indexuptoanotherindexhighwhilealsopostingabestsix-monthperformanceforthefirsthalf
ofayearsince1997.Therallywasn’tisolatedtotheU.S.marketseither,asinvestorssawcontinuedmomentumwithpositive
returnsacrossmostmajorglobalindexesthroughJuly.
Looking back over the months of recent headlines and it’s hardly surprising that investors have become sensitive to the
increasingly strident news. To date investors have continued to exit actively managed equity funds, a move likely sparked by
thenumerousmarketandeconomicpotholesalludedtoabove.Unfortunately,investorswhooptedoutofthemarketearlyin
theyearalsomissedtheequityrevivalthatfollowedtheinterestratereversalbytheFederalReserve(“Fed”),andtheonagain/
offagainpossibilityoftradetruces.ByJune’sclosetheS&P500hadposteditsbestreturnforthatmonthsince1955.Through
July, market breadth remained strong, as large caps outperformed small caps and, from a style perspective, growth stocks
continuedtooutperformtheirvaluecounterparts.
TheoverseasmarketsalsopostedpositivereturnsthroughJuly,althoughstilltrailingbehindtheU.S.equityindexes.And,while
market strength was broad based, the larger more-developed foreign company stocks have outpaced their emerging market
counterparts. There are likely any number ofreasonsforthedisparities, buttheyinclude foreigntradeissues,dollarstrength
levels,interestratedynamicsandmonetarypolicies.
Onthefixed-incomefront,therewasgoodnewsforbondholdersaswell.ThebondmarketsralliedintheU.S.onthepremise
thattheFedwouldfollowthroughonitsnuancedmonetaryeasingcomments,whichindeedprovedtobethecase.Bloomberg
BarclaysU.S.AggregateBondIndexendedinsolidlypositiveterritoryattheendofJuly,anticipatingfurtherFedeasingcoupled
withfearsoffalteringoverseasgrowth.Theseconcernsandrisinginvestorinteresthasdrivenreturnshigherinlongermaturity
governmentbondsandcorporatebonds(bothinvestmentgradeandhighyield).
Forthebalanceofthisyearandintonextweexpectvolatilityandeconomicuncertaintywillcontinuetobepartofthemarket
landscape. There are positive aspects to our outlook, including the potential for continued Fed policy easing and an on-again
trade truce with China. Small business optimism and consumer confidence surveys continue to hold steady, while inflation
worries are still on the back burner. The most recent jobs report for June serves as a reminder of how far the employment
picturehasimprovedsincetherecessionadecadeago.Themostrecenteconomicdataalsoprovidedsomereassuranceonthe
stateoftheconsumer,withrisingaggregateincomes,andconfidencelevelsandconsumptioncontinuingtotrackhigher.
Therehavealsobeendisappointingheadlinesrelatingtomanufacturing,bothhereandoverseas.Reportsfromallfiveregional
FederalReserveBankswerenegativethispastmonth,withaconsistentmessageofneworderdeclines,mostlikelyattributed
to trade issues. We’ve alsoseen these concerns reflected in recent GrossDomestic Product(“GDP”) estimates, with the New
York Fed forecasting economic growth of 1.5 percent for this past quarter and 1.7 percent for the third quarter. Corporate
earnings also appear to be trending into negative territory for the first time in many years, at least partially a reaction to
ongoingtradeissues(risingcosts,impactedsupplychannelsandfallingoverseassales).Addafewgeopoliticalconcerns(North
Korea, Brexit, China and Iran), political campaigning, coupled with renewed budget discussions, and the markets may indeed
provideafewmorevolatilemomentsbeforetheyear’sclose.
At Frost Investment Advisors we continue to manage through these anxious periods with a focus on finding investment
opportunities and meeting our shareholders’ expectations. Our focus is on investing with the longer term economic and
corporate fundamentals in mind, avoiding the emotional decisions that are driven by the headlines. We look forward to
continuingtoserveourshareholderswellthroughfuturemarketcycles.Weappreciateyourconfidenceinourteam.
Sincerely,
TomStringfellow
President,FrostInvestmentAdvisors
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FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
Pastperformancedoesnotguaranteefutureresults.Theinvestmentperformanceandprincipalvalueofaninvestmentwillfluctuatesothataninvestor’sshares,
whenredeemed,maybeworthmoreorlessthantheiroriginalcost,andcurrentperformancemaybelowerorhigherthantheperformancequoted.Investment
performancereflects voluntary feewaiversin effect.Absentthesewaivers,totalreturnandyieldwouldbereduced.TherecanbenoassurancethatFrost
InvestmentAdvisors,LLCwillcontinuetowaivefees.Forperformancedatacurrenttothemostrecentmonthend,pleasecall877.713.7678.
Theinformationprovidedinthisreportshouldnotbeconsideredarecommendationtopurchaseorsellanyparticularsecurity.Theseviewsaresubjecttochange
andarenotintendedtopredictorguaranteethefutureperformanceofanyindividualsecurityorthemarketsingeneral.Thereisnoassurancethatanysecurities
discussedhereinwillremaininanaccount’sportfolioatthetimeyoureceivethisreportorthatsecuritiessoldhavenotbeenrepurchased.Thesecuritiesdiscussed
donotrepresentanaccount’sentireportfolioandintheaggregatemayrepresentonlyasmallpercentageofanaccount’sportfolioholdings.
Mutualfundinvestinginvolvesriskincludingpossiblelossofprincipal.Internationalinvestmentsmayinvolveriskofcapitallossfromunfavorablefluctuationin
currencyvalues,fromdifferencesingenerallyacceptedaccountingprinciplesorfromsocial,economicorpoliticalinstabilityinothernations.Bondandbond
fundsaresubjecttointerestrateriskandwilldeclineinvalueasinterestratesrise.REITinvestmentsaresubjecttochangesineconomicconditions,creditrisk
andinterestratefluctuations.Emergingmarketsinvolveheightenedrisksrelatedtothesamefactorsaswellasincreasedvolatilityandlowertradingvolume.
Derivativesare often more volatile than other investments and may magnify the Fund’sgains or losses.Theprimary risk of derivativeinstruments is that
changesinthemarketvalueofsecuritiesheldbythefundandofthederivativeinstrumentsrelatingtothosesecuritiesmaynotbeproportionate.Derivativesare
alsosubjecttoilliquidityandcounterpartyrisk.Diversificationdoesnotprotectagainstmarketloss.
TheBloombergBarclaysU.S.AggregateBondIndexrepresentssecuritiesthatareSEC-registered,taxableanddollardenominated.TheindexcoverstheU.S.
investmentgradefixedratebondmarket,withindexcomponentsforgovernmentandcorporatesecurities,mortgagepass-throughsecuritiesandasset-backed
securities.
TheS&P500Indexisamarket-valueweightedindexconsistingof500stockschosenformarketsize,liquidity,andindustrygrouprepresentation,witheach
stock’sweightintheIndexproportionatetoitsmarketvalue.
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FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
MANAGEMENTDISCUSSIONANDFUNDPERFORMANCE(Unaudited) FROSTGROWTHEQUITYFUND
MarketReview
Equity markets completed a volatile twelve month period with solid overall gains, underpinned by accommodative monetary
policyglobally,andaggressivecorporatestockbuybacksintheU.S.TheworstDecembersince1931wasfollowedbythebest
firsthalfinmorethan20years,withtherallyoccurringagainstafairlyimprobablebackdrop.Forexample,theglobalPurchas-
ingManagersIndex(“PMI”),whichisaproxyforglobalgrowth,hasfallenforarecord14monthsinarow,andtheoutcomeof
thetradestandoffwithChinastillremainsuncertain.ButtheFederalReservemadeadramaticpivotinJanuary,fromatighten-
ing bias to an easing bias, and now seems on the cusp of a new monetary easing cycle, which could breathe new life intoan
alreadyrecordeconomicexpansion.
Turningtothe Fiscal Year 2019period, the FrostGrowthEquity Fund (the “Fund”) returned 10.34%forthe InstitutionalClass
Shares, and 10.05% for the Investor Class Shares, modestly underperforming its benchmark, the Russell 1000 Growth Index,
whichreturned10.82%overthesametimeperiod.
Relativeunderperformance duringthefiscalyearwasdrivenbysomeunfavorableallocationdecisionsintermsofsectorover
andunderweights,aswellasasmalldragfromcash,mostofwhichwasoffsetbystrongoverallstockselection.Stockselection
wasparticularlystrongintwoofourlargestsectors,InformationTechnologyandHealthCare,aswellasintwoofoursmaller
sectors, Consumer Staples and Real Estate Investment Trusts (“REITs”). In the Information Technology sector, the Fund out-
performedby900basispoints,ledbyourholdingsinseveralsoftwareandpaymentsrelatedcompanies.Forexample,insoft-
ware,wehadstrongoutperformancefromholdingsWorkday(+61.2%),ServiceNow(+57.6%),andMicrosoft(+30.6%),whilein
paymentswesawgoodreturnsfromlong-timeholdingsMasterCard(+38.3%),PayPal(+34.4%),andVisa(+31.0%).IntheHealth
Care sector, the Fund outperformed by 750 basis points. Notable performers in the Health Care sector include Edwards Life-
sciences(+49.4%),Danaher(+37.7%),andZoetis(+33.7%).
Intermsoffactorsthatdetractedfromrelativeresults,itwasprimarilyunderperformanceintheIndustrialandFinancialssec-
torsonastockselectionbasis,aswellasanunfavorableallocationtotheEnergyandInformationTechnologysectors.Inpartic-
ular, the Fund was overweight Energy, a sector that underperformed the overall market meaningfully, and underweight
Information Technology, a sector that meaningfully outperformed the overall market. These two sector allocation decisions
represented a more than 100 basis points headwind for the relative performance of the Fund. The Fund’s allocation to cash
representedabout50basispointsofimpact.
In terms of our outlook, we are focused on the Federal Reserve, trade policy and the macroeconomic backdrop. Since the
Federal Reserve has begun cutting interest rates, the focus now shifts to whether the economy avoids falling into recession.
Accommodative monetary policy with an economy that showssignsofstabilizationand/orisabletopotentially re-accelerate
tendstobeapositivebackdropforequityprices.WethinksomesortoftraderesolutionwithChinaiskeytodrivingthatstabili-
zationinglobalgrowthtrends.
Our investment process remains focused on identifying structurally attractive businesses with sustainable growth advantages
thatarecompetitivelydifferentiatedandledbystrongmanagementteams.Webelievethisishowwecanaddthemostvalue
overthecourseofaninvestmentcycle,regardlessofwhathappenswithinterestrates,tradepolicy,orthebroadereconomy.
Theinformationprovidedinthisreportshouldnotbeconsideredarecommendationtopurchaseorsellanyparticularsecurity.Theseviewsaresubjecttochange
andarenot intendedto predict or guaranteethefutureperformanceof anyindividualsecurity or themarkets in general.Thereisnoassurancethatany
securitiesdiscussedhereinwillremainintheFund’sportfolioatthetimeyoureceivethisreportorthatsecuritiessoldhavenotbeenrepurchased.Thesecurities
discusseddonotrepresenttheFund’sentireportfolioandintheaggregatemayrepresentonlyasmallpercentageoftheFund’sportfolioholdings.
Performancedataquotedrepresentspastperformanceanddoesnotguaranteesimilarfutureresults.Theinvestmentperformanceandprincipalvalueofan
investmentwillfluctuatesothataninvestor’sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost,andcurrentperformancemaybe
lowerorhigherthantheperformancequoted.Forperformancedatacurrenttothemostrecentmonthend,pleasecall877.713.7678.
Mutualfundinvestinginvolvesriskincludingpossiblelossofprincipal.TherecanbenoassurancethattheFundwillachieveitsstatedobjective.
REITinvestmentsaresubjecttochangesineconomicconditions,creditriskandinterestratefluctuations.
Indexperformancereturnsdonotreflectanymanagementfees,transactioncostsorexpenses.Indexesareunmanagedandonecannotinvestdirectlyinan
index.
TheRussell1000GrowthIndexmeasurestheperformanceofthoseRussell1000companieswithhigherprice-bookratiosandhigherforecastedgrowthvalues.
TheS&P500Indexisamarket-valueweightedindexconsistingof500stockschosenformarketsize,liquidity,andindustrygrouprepresentation,witheach
stock’s weight in the Index proportionate to its market value. The S&P 500 Growth Index contains those securities of the S&P 500 Index with growth
characteristics.
3
FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
MANAGEMENTDISCUSSIONANDFUNDPERFORMANCE(Unaudited) FROSTGROWTHEQUITYFUND
Growthofa$1,000,000Investment
$4,600,000 Annualized Annualized Annualized Annualized
One Year 3 Year 5 Year 10 Year Incep(cid:2)on
Return Return Return Return to Date $4,314,172
4,200,000 $4,213,880
10.34% 18.48% 13.35% 14.11% 9.77% Ins(cid:2)tu(cid:2)onal Class Shares(2)
10.05% 18.20% 13.06% 13.85% 10.01% Investor Class Shares(3)(4)
3,800,000 10.82% 17.13% 14.25% 15.74% 11.25% Russell 1000 Growth Index
$3,743,629
9.55% 15.94% 13.64% 15.47% 11.10% S&P 500 Growth Index
3,400,000
3,000,000
2,600,000
2,200,000
1,800,000
1,400,000
1,000,000
600,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Period ended July 31st
Frost Growth Equity Fund, Ins(cid:2)tu(cid:2)onal Class Shares(1)(2) Russell 1000 Growth Index
S&P 500 Growth Index
(1) ThegraphisbasedononlyInstitutionalClassShares;performanceforInvestorClassShareswouldbelowerduetodifferencesinfeestructures.
(2) InstitutionalClassSharescommencedoperationsonApril25,2008.
(3) EffectiveMarch31,2015,ClassAShareswerere-designatedasInvestorClassShares.PriortoMarch31,2015,shareholderswerechargedasaleschargeon
purchases and redemptions of Class A Shares. The performance information provided for the period between the inception date and March 30, 2015
representstheperformanceofInvestorClassShareswhentheywerecalledClassAShares.TheshareclasschangehadnoimpactontheFund’soperationsor
investmentpolicy.
(4) InvestorClassSharescommencedoperationsonJune30,2008.
TheperformancedataquotedhereinrepresentspastperformanceandthereturnandvalueofaninvestmentintheFundwillfluctuatesothat,whenredeemed,
maybeworthlessthanitsoriginalcost.Pastperformanceisnoguaranteeoffutureperformanceandshouldnotbeconsideredasarepresentationofthefuture
resultsoftheFund.TheFund’sperformanceassumesthereinvestmentofdividendsandcapitalgains.Indexreturnsassumereinvestmentofdividendsand,
unlikeafund’sreturns,donotreflectanyfeesorexpenses.Ifsuchfeesandexpenseswereincludedintheindexreturns,theperformancewouldhavebeenlower.
TheperformanceoftheFundwouldhavebeenlowerhadtheAdvisernotwaivedaportionofitsfees.
Pleasenotethatonecannotinvestdirectlyinanunmanagedindex.
ReturnsshowndonotreflectthedeductionoftaxesthatashareholderwouldpayonFunddistributionsortheredemptionofFundshares.
TherearenoassurancesthattheFundwillmeetitsstatedobjectives.TheFund’sholdingsandallocationsaresubjecttochangebecauseitisactivelymanaged
andshouldnotbeconsideredrecommendationstobuyindividualsecurities.
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FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
MANAGEMENTDISCUSSIONANDFUNDPERFORMANCE(Unaudited) FROSTVALUEEQUITYFUND
MarketOverview
Thefirsthalfofthefiscalyearwasanalogoustoataleoftwocities,withthethirdquarterof2018endingwithabullishsurge,
which vaulted the Russell 1000 Value Index to an all-time high, followed soon thereafter with a punishing, near bear market
swoonof19%causedbyheightenedtradewarconcerns,fadingbenefitsfromtaxreformandslowingeconomicandcorporate
earnings growth.With December 24,2018marking the bottom,the market bounced back 24%throughthe endofJuly2019.
Most laggards in 2018postedstronggains during the first quarter of2019.Asthe year progressed, defensive sectors such as
Utilities and REITs, as well as select companies in the Technology and Consumer Discretionary industries, posted the best
returns.Financialscompanieswithinterestraterisk,likebanksandlifeinsurancecompanies,havelaggedasthe10-yearTreas-
uryyielddriftedloweroverthesecondhalfofthefiscalyear.
Sector performance over the past twelve months was impacted by factor-based investment strategies as investors avoided
sectors with interest rate, trade and regulatory risks. Value stocks continued to underperform growth stocks, partially due to
thelackofpricediscoveryattributabletotheongoingriseofpassiveinvestments.ETFfundflowspropelledthelargestofthe
large cap stocks higher as well. Finally, the scarcity of earnings growth drove investors into an ever-shrinking pool of growth
stocksresultinginacrowdingeffect.WhiletheunderperformanceofValueintimessuchasthesemayfeeleternal,webelieve
thatvaluationwillmattertoinvestorsagainatsomepointinthefuture.
PerformanceandHighlights:
For the one-year period ended July 31,2019,the FrostValue Equity Fund (the “Fund”) InstitutionalClass Shares and Investor
Class Shares returned -1.12% and -1.46%, respectively, net of fees and expenses vs the Russell 1000 Value Index benchmark
returnof5.20%.FinancialsandIndustrialswerepositivecontributorstotheFund’stotalreturn.However,thiswasmorethan
offset by weak performance within the remaining sectors. While the Fund continues to broaden sector exposure, stock
selectionhasprovedchallenging,asthepastyearhasseenseveralportfolioholdingsundulypunished.
To reduce portfolio concentration, the Fund expanded to 51 holdings. This past year we added fourteen new companies and
removedfive.ThenewadditionsincludedJohnson&Johnson,JPMorgan,Comcast,Merck,AstraZeneca,Aon,Chubb,PPL,Fox,
Anthem,CBOE,KeyCorp,FidelityNationalInformation,andPVH.Nielsen,Newell,Shire,Skyworks,andNovartisweresoldfrom
theportfoliooverthepastyear,inallcasesduetocompanyspecificissues.
OverthepastyearthecontributionfromthenewportfolioholdingshavebeenadditivetotheFund’stotalrelativereturn.Weare
encouragedbytheseresults.Asusual,weremainvigilanttoanythesisdegradation,andwilladjustourpositionswhenprudent.
TheFundbeginsfiscal2020withaportfolioofsecuritiesthatofferwhatwethinkisanexcellentpotentialforthefuture.Weunder-
standthatmarketvolatilitycouldresultinperiodsofrelativeunderperformance,butweareoptimisticaboutthelong-termpoten-
tial of our current holdings. Our process systematically selects companies with improving earnings and cash flow. We invest in
thesecompanies,expectingtheywillincreaseinvalueasthemarketplacerecognizestheirenhancedearningspower.
Theinformationprovidedinthisreportshouldnotbeconsideredarecommendationtopurchaseorsellanyparticularsecurity.Theseviewsaresubjecttochange
andarenot intendedto predict or guaranteethefutureperformanceof anyindividualsecurity or themarkets in general.Thereisnoassurancethatany
securitiesdiscussedhereinwillremainintheFund’sportfolioatthetimeyoureceivethisreportorthatsecuritiessoldhavenotbeenrepurchased.Thesecurities
discusseddonotrepresenttheFund’sentireportfolioandintheaggregatemayrepresentonlyasmallpercentageoftheFund’sportfolioholdings.
Performancedataquotedrepresentspastperformanceanddoesnotguaranteesimilarfutureresults.Theinvestmentperformanceandprincipalvalueofan
investmentwillfluctuatesothataninvestor’sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost,andcurrentperformancemaybe
lowerorhigherthantheperformancequoted.Forperformancedatacurrenttothemostrecentmonthend,pleasecall877.713.7678.
It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that the investment
recommendationsordecisionswemakeinthefuturewillbeprofitableorwillequaltheinvestmentperformanceofthesecuritiesdiscussedherein.
Theviewsexpressedbytheportfoliomanagersreflecttheirprofessionalopinionsandshouldnotbeconsideredbuyorsellrecommendations.Theseviewsare
subjecttochangeandarenotintendedtopredictorguaranteethefutureperformanceofanyindividualsecurityorthemarkets.
Mutualfundinvestinginvolvesriskincludingpossiblelossofprincipal.TherecanbenoassurancethattheFundwillachieveitsstatedobjectives.
Indexperformancereturnsdonotreflectanymanagementfees,transactioncostsorexpenses.Indexesareunmanagedandonecannotinvestdirectlyinan
index.
TheRussell1000ValueIndexmeasurestheperformanceofthoseRussell1000companieswithlowerprice-bookratiosandlowerforecastedgrowthvalues.
TheS&P500Indexisamarket-valueweightedindexconsistingof500stockschosenformarketsize,liquidity,andindustrygrouprepresentation,witheach
stock’sweightintheIndexproportionatetoitsmarketvalue.TheS&P500ValueIndexcontainsthosesecuritiesoftheS&P500Indexwithvaluecharacteristics.
5
FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
MANAGEMENTDISCUSSIONANDFUNDPERFORMANCE(Unaudited) FROSTVALUEEQUITYFUND
Growthofa$1,000,000Investment
Annualized Annualized Annualized Annualized
One Year 3 Year 5 Year 10 Year Incep(cid:2)on
Return Return Return Return to Date
$3,500,000 -1.12% 7.38% 6.71% 9.79% 6.40% Ins(cid:2)tu(cid:2)onal Class Shares(2)
-1.46% 7.10% 6.44% 9.53% 6.86% Investor Class Shares(3)(4)
5.20% 9.44% 8.01% 12.40% 7.31% Russell 1000 Value Index $3,218,117
6.28% 10.30% 8.64% 12.39% 7.20% S&P 500 Value Index $3,214,465
3,000,000
2,500,000 $2,544,978
2,000,000
1,500,000
1,000,000
500,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Period ended July 31st
Frost Value Equity Fund, Ins(cid:2)tu(cid:2)onal Class Shares(1)(2) S&P 500 Value Index
Russell 1000 Value Index
(1) ThegraphisbasedononlyInstitutionalClassShares;performanceforInvestorClassShareswouldbelowerduetodifferencesinfeestructures.
(2) InstitutionalClassSharescommencedoperationsonApril25,2008.
(3) EffectiveMarch31,2015,ClassAShareswerere-designatedasInvestorClassShares.PriortoMarch31,2015,shareholderswerechargedasaleschargeon
purchases and redemptions of Class A Shares. The performance information provided for the period between the inception date and March 30, 2015
representstheperformanceofInvestorClassShareswhentheywerecalledClassAShares.TheshareclasschangehadnoimpactontheFund’soperationsor
investmentpolicy.
(4) InvestorClassSharescommencedoperationsonJune30,2008.
TheperformancedataquotedhereinrepresentspastperformanceandthereturnandvalueofaninvestmentintheFundwillfluctuatesothat,whenredeemed,
maybeworthlessthanitsoriginalcost.Pastperformanceisnoguaranteeoffutureperformanceandshouldnotbeconsideredasarepresentationofthefuture
resultsoftheFund.TheFund’sperformanceassumesthereinvestmentofdividendsandcapitalgains.Indexreturnsassumereinvestmentofdividendsand,
unlikeafund’sreturns,donotreflectanyfeesorexpenses.Ifsuchfeesandexpenseswereincludedintheindexreturns,theperformancewouldhavebeenlower.
TheperformanceoftheFundwouldhavebeenlowerhadtheAdvisernotwaivedaportionofitsfees.
Pleasenotethatonecannotinvestdirectlyinanunmanagedindex.
ReturnsshowndonotreflectthedeductionoftaxesthatashareholderwouldpayonFunddistributionsortheredemptionofFundshares.
TherearenoassurancesthattheFundwillmeetitsstatedobjectives.TheFund’sholdingsandallocationsaresubjecttochangebecauseitisactivelymanaged
andshouldnotbeconsideredrecommendationstobuyindividualsecurities.
6
FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
MANAGEMENTDISCUSSIONANDFUNDPERFORMANCE(Unaudited) FROSTMIDCAPEQUITYFUND
InvestmentThesis:
The risk and return investment thesis for mid-capitalization equities as an attractive, lower risk, alternative to small-
capitalization stocksiscompelling.Strategically mid-capcompaniesgenerallyhavemorematurestablebusinessmodelswhile
having,overtime,attractivegrowthpotential.
Thispastfiscalyear,theRussellMidcapIndexhadatotalreturnof6.71%comparedwiththeRussell2000SmallCapIndexdeliv-
ering a return of-4.42%.Risk/Volatility, asmeasured by standarddeviationofreturn,was21.26fortheRussellMidcapIndex
whilehigherat24.85fortheRussell2000SmallCapIndex.
InvestmentProcess:
Frost Investment Advisor’s management team combines both quantitative rigor with a bottom up approach to fundamental
companylevelresearch.Ourproprietaryquantitativeanalysisscreensforattractiverelativeattributesfromtheapproximately
800companiesthatmakeuptheRussellMidcapIndex.Qualityofbalancesheet,valuationmeasures,andmomentumofcom-
panyfundamentalsareallinputsthatarequantitativelymeasured.Ourfundamental,companylevel,researcheffortsfocuson
identifyinganinvestmentthesisforapotentialinvestment,evaluatingthecompetitivelandscapeaswellasthecompany’sstra-
tegic advantage, the viability of its business model, the strength of the company’s financial condition and the integrity and
stewardshipofmanagement.
InvestmentApproach:
A “core” methodology which is diversified across economic sectors while incorporating growth and value style attributes is
deployed.
Fiscal2019Results:
In keeping with our core methodology and managed risk orientation the Fund’s management team tightened its sector
exposure relative to the Russell Midcap Index. Sector variation was constrained to reduce Fund performance volatility. As an
example, Information Technology began the year significantly underweighted at 8.66%.The allocation to Tech was purposely
increasedduringtheyearto17.66%,whichputitmoreinlinewithitsbenchmark,whichhasthesectorataweightof17.82%.
ConverselyConsumerStaplesbegantheyearwithanoverweightof9.23%andwasstrategicallyreducedto3.91%,moreinline
withtheMidcapindexweightof2.8%.
Stock selection remains a key source of return over time. The Fund’s top five performers included Dollar Tree, Church and
Dwight, Hormel Foods, Cincinnati Financial and Analog Devices. The bottom fiver performers included Nordstrom’s,
Patterson-UTIEnergy,SynovusFinancial,LaboratoryCorporation,ValvolineandFluorCorporation.
TheFundslightlyunderperformeditsbenchmark,returning5.67%(InstitutionalClassShares)and5.60%(InvestorClassShares)
compared to6.71%forthe Russell Midcap Index.From a risk perspective theFundhadsubstantially lowervolatilityasmeas-
uredbystandarddeviationofreturn,withtheFund’sstandarddeviationendingtheperiodat17.05,comparedto21.26forthe
RussellMidcapIndex.
GoingForward:
We continue to believe that Mid-Cap companies are a compelling consideration for use as part of a diversified approach to
assetallocation.OurapproachtoMid-Capinvestingwillcontinuetoemphasizeourefforttocapturethemajorityofbenchmark
returnswithsubstantiallylessvolatilityandrisk.
Theinformationprovidedinthisreportshouldnotbeconsideredarecommendationtopurchaseorsellanyparticularsecurity.Theseviewsaresubjecttochange
andarenot intendedto predict or guaranteethefutureperformanceof anyindividualsecurity or themarkets in general.Thereisnoassurancethatany
securitiesdiscussedhereinwillremainintheFund’sportfolioatthetimeyoureceivethisreportorthatsecuritiessoldhavenotbeenrepurchased.Thesecurities
discusseddonotrepresenttheFund’sentireportfolioandintheaggregatemayrepresentonlyasmallpercentageoftheFund’sportfolioholdings.
Performancedataquotedrepresentspastperformanceanddoesnotguaranteesimilarfutureresults.Theinvestmentperformanceandprincipalvalueofan
investmentwillfluctuatesothataninvestor’sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost,andcurrentperformancemaybe
lowerorhigherthantheperformancequoted.Forperformancedatacurrenttothemostrecentmonthend,pleasecall877.713.7678.
Mutualfundinvestinginvolvesriskincludingpossiblelossofprincipal.Inadditiontothenormalrisksassociatedwithinvesting,investinginsmallercompanies
typicallyexhibithighervolatility.TherecanbenoassurancethattheFundwillachieveitsstatedobjective.
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FROST FAMILY OF FUNDS
FROST FUNDS | JULY 31, 2019
MANAGEMENTDISCUSSIONANDFUNDPERFORMANCE(Unaudited) FROSTMIDCAPEQUITYFUND
Indexperformancereturnsdonotreflectanymanagementfees,transactioncostsorexpenses.Indexesareunmanagedandonecannotinvestdirectlyinan
index.
The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap Index is a subset of the
Russell1000®Index.Itincludesapproximately800ofthesmallestsecuritiesbasedonacombinationoftheirmarketcapandcurrentindexmembership.
TheRussellMidcapIndexrepresentsapproximately27%ofthetotalmarketcapitalizationoftheRussell1000companies.
TheRussell2500Indexmeasurestheperformanceofthesmalltomid-capsegmentoftheU.S.equityuniverse.TheRussell2500IndexisasubsetoftheRussell
3000Index.Itincludesapproximately2500ofthesmallestsecuritiesbasedonacombinationoftheirmarketcapandcurrentindexmembership.
TheRussell2000Indexmeasurestheperformanceofthesmall-capsegmentoftheU.S.equityuniverse.TheRussell2000IndexisasubsetoftheRussell3000®
Indexrepresentingapproximately8%ofthetotalmarketcapitalizationofthatindex.Itincludesapproximately2,000ofthesmallestsecuritiesbasedona
combinationoftheirmarketcapandcurrentindexmembership.
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