UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21829
BBH TRUST
On behalf of the following series:
BBH Money Market Fund
(Exact name of registrant as specified in charter)
140 Broadway, New York, NY 10005
(Address of principal executive offices) (Zip Code)
Corporation Services Company
2711 Centerville Road, Suite 400, Wilmington, DE 19808
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 625-5759
Date of fiscal year end: June 30
Date of reporting period: June 30, 2012
Item 1. Report to Stockholders.
Annual Report
JUNE 30, 2012
BBH Money Market Fund
BBH MONEY MARKET FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE |
June 30, 2012 |
For the 12-month period ended June 30, 2012, the BBH Money Market Fund (the “Fund”) produced a total return of 0.01% for both its regular and institutional shares. We believe the performance of the Fund was competitive with industry peers, while maintaining a high degree of quality and liquidity throughout the period.
The Fund seeks to maximize income while attempting to preserve capital and maintain liquidity by investing primarily in a diversified portfolio of liquid, high-quality, short-term debt instruments. To that end, the Fund’s investments include securities issued or guaranteed as to principal and interest by the U.S. government or its agencies, deposits in and commercial paper issued by large, well-capitalized global banks, commercial paper issued by large credit worthy U.S. corporations, U.S. municipals, and repurchase agreements backed by U.S. government and agency collateral.
During the first half of the reporting period, credit conditions began to show signs of elevated stress in response to the discourse in Congress regarding the U.S. debt ceiling, weaker than expected U.S. economic data, and ongoing concerns of the European sovereign debt crisis. For non-U.S. banks, dollar-based funding became more difficult, evidenced by the more than doubling of the three-month London Interbank Offered Rate (LIBOR) from 25 to 58 basis points.
As a result of these developments, investors engaged in a “flight to quality” away from riskier assets, reducing exposure to European banks while increasing exposure to U.S. Treasuries and banks in more favored countries such as Canada and Australia. In response to the growing liquidity concerns, the European Central Bank (ECB) announced the Long-Term Refinancing Operation (LTRO) while the Federal Reserve (Fed) introduced Operation Twist and included forward rate guidance in its statement, noting that “economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014”.
During the second half of the reporting period, the Fed maintained its accommodative monetary policy anchoring money market rates near historically low levels. The Fed’s declaration to maintain exceptionally low short-term interest rates coupled with expectation of an expansion to the Fed’s current policy reduced investor apprehension relative to the beginning of the reporting period. Despite the improved tone in the market, investors remain cautious due to slow U.S. economic growth, the unresolved European sovereign debt crisis, and speculation of additional government regulation.
The investment team for the BBH Money Market Fund maintained what it believed to be a conservative investment strategy throughout the period. We continue to perform our own rigorous credit assessment of all securities purchased for the Fund and do not rely on rating agency opinions to determine credit quality. To date, the investment team has delivered a consistently competitive return and ample liquidity.
2 |
BBH MONEY MARKET FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) |
June 30, 2012 |
Performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month end performance and after tax returns, contact the Fund at 1-800-625-5759.
An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
FINANCIAL STATEMENT JUNE 30, 2012 | 3 |
BBH MONEY MARKET FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Trustees of the BBH Trust and Shareholders of BBH Money Market Fund:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Money Market Fund (a series of BBH Trust) (the “Fund”) as of June 30, 2012, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2012, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BBH Money Market Fund as of June 30, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 22, 2012
4 |
BBH MONEY MARKET FUND |
PORTFOLIO ALLOCATION |
June 30, 2012 |
BREAKDOWN BY SECURITY TYPE AND OTHER ASSETS | |||||
U.S. $ Value | Percent of Net Assets | ||||
Certificates of Deposit | $ | 285,115,257 | 18.5 | % | |
Commercial Paper | 235,942,206 | 15.3 | |||
Municipal Bonds | 213,309,000 | 13.8 | |||
U.S. Government Agency Obligations | 304,954,179 | 19.8 | |||
U.S. Treasury Bills | 134,990,241 | 8.8 | |||
Time Deposits | 167,900,000 | 10.9 | |||
Repurchase Agreements | 155,000,000 | 10.1 | |||
Cash and Other Assets in Excess of Liabilities | 42,338,968 | 2.8 | |||
NET ASSETS | $ | 1,539,549,851 | 100.0 | % |
All data as of June 30, 2012. The Fund’s breakdown by security type is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT JUNE 30, 2012 | 5 |
BBH MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS |
June 30, 2012 |
Principal Amount | Maturity Date | Interest Rate | Value | ||||||
CERTIFICATES OF DEPOSIT (18.5%) | |||||||||
$ | 43,100,000 | Bank of Montreal | 07/03/12 | 0.190% | $ | 43,100,024 | |||
40,000,000 | Bank of Tokyo-Mitsubishi UFJ Ltd. | 08/30/12 | 0.320 | 40,000,333 | |||||
40,000,000 | Credit Suisse | 08/14/12 | 0.270 | 40,000,000 | |||||
12,000,000 | DnB NOR Bank ASA | 08/20/12 | 0.260 | 12,000,000 | |||||
28,000,000 | DnB NOR Bank ASA | 09/10/12 | 0.300 | 28,000,000 | |||||
22,000,000 | Rabobank Nederland NV | 09/04/12 | 0.380 | 22,002,380 | |||||
18,000,000 | Rabobank Nederland NV | 09/17/12 | 0.570 | 18,011,287 | |||||
40,000,000 | Standard Chartered Bank | 09/12/12 | 0.290 | 40,000,810 | |||||
22,000,000 | Svenska Handelsbanken | 09/04/12 | 0.285 | 22,000,198 | |||||
20,000,000 | Svenska Handelsbanken | 09/20/12 | 0.305 | 20,000,225 | |||||
Total Certificates of Deposit | 285,115,257 | ||||||||
COMMERCIAL PAPER (15.3%) | |||||||||
10,000,000 | Barclays U.S. Funding Corp.1 | 07/02/12 | 0.070 | 9,999,980 | |||||
40,000,000 | Barclays U.S. Funding Corp.1 | 07/16/12 | 0.200 | 39,996,667 | |||||
30,000,000 | Deutsche Bank Financial LLC1 | 07/30/12 | 0.330 | 29,992,025 | |||||
40,000,000 | ING US Funding LLC1 | 08/30/12 | 0.330 | 39,978,000 | |||||
8,000,000 | Inova Health System Foundation1 | 09/12/12 | 0.170 | 7,997,242 | |||||
8,000,000 | Johns Hopkins University | 07/12/12 | 0.150 | 8,000,000 | |||||
20,000,000 | National Australia Funding | ||||||||
Delaware, Inc.1,2 | 07/02/12 | 0.135 | 19,999,925 | ||||||
20,000,000 | National Australia Funding | ||||||||
Delaware, Inc.1,2 | 09/17/12 | 0.210 | 19,990,900 | ||||||
20,000,000 | Societe Generale NA1 | 07/02/12 | 0.200 | 19,999,889 | |||||
40,000,000 | UBS Finance Delaware LLC1 | 08/22/12 | 0.215 | 39,987,578 | |||||
Total Commercial Paper | 235,942,206 | ||||||||
MUNICIPAL BONDS (13.8%) | |||||||||
1,700,000 | Buncombe County, North Carolina3 | 07/09/12 | 0.280 | 1,700,000 | |||||
2,000,000 | Buncombe County, North Carolina3 | 07/09/12 | 0.280 | 2,000,000 | |||||
2,000,000 | Buncombe County, North Carolina3 | 07/09/12 | 0.280 | 2,000,000 | |||||
14,000,000 | California State Health Facilities | ||||||||
Financing Authority3 | 07/09/12 | 0.150 | 14,000,000 | ||||||
9,290,000 | Charlotte, North Carolina3 | 07/09/12 | 0.180 | 9,290,000 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) |
June 30, 2012 |
Principal Amount | Maturity Date | Interest Rate | Value | ||||||
MUNICIPAL BONDS (continued) | |||||||||
$ | 14,000,000 | Connecticut State Health & Educational | |||||||
Facility Authority3 | 07/09/12 | 0.130% | $ | 14,000,000 | |||||
4,190,000 | Guilford County, North Carolina3 | 07/09/12 | 0.160 | 4,190,000 | |||||
5,345,000 | Houston, Texas, Higher Education | ||||||||
Finance Corp.3 | 07/09/12 | 0.180 | 5,345,000 | ||||||
8,021,000 | Illinois State Finance Authority3 | 07/09/12 | 0.130 | 8,021,000 | |||||
9,830,000 | Illinois State Finance Authority3 | 07/09/12 | 0.220 | 9,830,000 | |||||
13,995,000 | Kansas State Department of | ||||||||
Transportation3 | 07/09/12 | 0.160 | 13,995,000 | ||||||
14,673,000 | Massachusetts State Development | ||||||||
Finance Agency3 | 07/09/12 | 0.160 | 14,673,000 | ||||||
12,100,000 | Massachusetts State Health & | ||||||||
Educational Facilities Authority3 | 07/09/12 | 0.130 | 12,100,000 | ||||||
275,000 | Massachusetts State Health & | ||||||||
Educational Facilities Authority3 | 07/09/12 | 0.250 | 275,000 | ||||||
11,495,000 | Metropolitan Water District of | ||||||||
Southern California3 | 07/09/12 | 0.220 | 11,495,000 | ||||||
2,395,000 | New Hampshire State Health & | ||||||||
Education Facilities Authority3 | 07/09/12 | 0.150 | 2,395,000 | ||||||
13,425,000 | New Hampshire State Health & | ||||||||
Education Facilities Authority3 | 07/09/12 | 0.150 | 13,425,000 | ||||||
3,665,000 | New Jersey State Educational | ||||||||
Facilities Authority3 | 07/09/12 | 0.150 | 3,665,000 | ||||||
4,520,000 | New York State Dormitory Authority3 | 07/09/12 | 0.150 | 4,520,000 | |||||
4,200,000 | North Carolina State Capital Facilities | ||||||||
Finance Agency3 | 07/09/12 | 0.170 | 4,200,000 | ||||||
3,850,000 | North Carolina State Medical Care | ||||||||
Commission3 | 07/09/12 | 0.150 | 3,850,000 | ||||||
4,700,000 | State of Ohio3 | 07/09/12 | 0.150 | 4,700,000 | |||||
1,000,000 | Oklahoma State Turnpike Authority3 | 07/02/12 | 0.170 | 1,000,000 | |||||
14,000,000 | Pennsylvania State Turnpike | ||||||||
Commission3 | 07/09/12 | 0.320 | 14,000,000 | ||||||
6,200,000 | Private Colleges & Universities | ||||||||
Authority3 | 07/09/12 | 0.140 | 6,200,000 |
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT JUNE 30, 2012 | 7 |
BBH MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) |
June 30, 2012 |
Principal Amount | Maturity Date | Interest Rate | Value | ||||||
MUNICIPAL BONDS (continued) | |||||||||
$ | 11,600,000 | San Diego County, California, Regional | |||||||
Transportation Commission3 | 07/09/12 | 0.150% | $ | 11,600,000 | |||||
7,185,000 | Tempe, Arizona3 | 07/09/12 | 0.180 | 7,185,000 | |||||
13,655,000 | University of Michigan3 | 07/09/12 | 0.160 | 13,655,000 | |||||
Total Municipal Bonds | 213,309,000 | ||||||||
U.S. GOVERNMENT AGENCY | |||||||||
OBLIGATIONS (19.8%) | |||||||||
50,000,000 | Fannie Mae Discount Notes1 | 07/25/12 | 0.105 | 49,996,500 | |||||
40,000,000 | Fannie Mae Discount Notes1 | 09/05/12 | 0.115 | 39,991,566 | |||||
25,000,000 | Fannie Mae Discount Notes1 | 09/12/12 | 0.115 | 24,994,170 | |||||
45,000,000 | Federal Home Loan Bank | ||||||||
Discount Notes1 | 07/25/12 | 0.090 | 44,997,300 | ||||||
25,000,000 | Federal Home Loan Bank | ||||||||
Discount Notes1 | 08/10/12 | 0.120 | 24,996,667 | ||||||
45,000,000 | Federal Home Loan Bank | ||||||||
Discount Notes1 | 09/19/12 | 0.125 | 44,987,500 | ||||||
50,000,000 | Freddie Mac Discount Notes1 | 08/07/12 | 0.075 | 49,996,146 | |||||
25,000,000 | Freddie Mac Discount Notes1 | 09/10/12 | 0.115 | 24,994,330 | |||||
Total U.S. Government | |||||||||
Agency Obligations | 304,954,179 | ||||||||
U.S. TREASURY BILLS (8.8%) | |||||||||
50,000,000 | U.S. Treasury Bill1 | 07/19/12 | 0.065 | 49,998,375 | |||||
85,000,000 | U.S. Treasury Bill1,4 | 08/23/12 | 0.065 | 84,991,866 | |||||
Total U.S. Treasury Bills | 134,990,241 | ||||||||
TIME DEPOSITS (10.9%) | |||||||||
42,900,000 | BNP Paribas | 07/02/12 | 0.120 | 42,900,000 | |||||
50,000,000 | HSBC Bank | 07/02/12 | 0.050 | 50,000,000 | |||||
20,000,000 | Societe Generale | 07/02/12 | 0.180 | 20,000,000 | |||||
55,000,000 | Wells Fargo | 07/02/12 | 0.100 | 55,000,000 | |||||
Total Time Deposits | 167,900,000 |
The accompanying notes are an integral part of these financial statements.
8 |
BBH MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) |
June 30, 2012 |
Principal Amount | Maturity Date | Interest Rate | Value | ||||||
REPURCHASE AGREEMENTS (10.1%) | |||||||||
$ | 30,000,000 | BNP Paribas (Agreement dated 06/29/12 | |||||||
collateralized by FNMA 2.500%, due | |||||||||
06/01/22, value $30,600,000) | 07/02/12 | 0.190% | $ | 30,000,000 | |||||
40,000,000 | Deutsche Bank Securities, Inc. | ||||||||
(Agreement dated 06/29/12 collateralized | |||||||||
by U.S. Treasury Bond 0.250%, due | |||||||||
01/15/15, value $40,800,073) | 07/02/12 | 0.200 | 40,000,000 | ||||||
55,000,000 | Royal Bank of Canada (Agreement | ||||||||
dated 06/29/12 collateralized by | |||||||||
FHLMC 2.471%, due 06/01/42, | |||||||||
value $17,175,011, FNMA 3.771%, | |||||||||
due 12/01/39, value $38,924,989) | 07/02/12 | 0.140 | 55,000,000 | ||||||
30,000,000 | Societe Generale Securities, Inc. | ||||||||
(Agreement dated 06/29/12 | |||||||||
collateralized by FHLMC 2.922%, due | |||||||||
05/01/35, value $27,180,825, FNMA | |||||||||
2.783%, due 07/01/39, value $3,419,175) | 07/02/12 | 0.170 | 30,000,000 | ||||||
Total Repurchase Agreements | 155,000,000 | ||||||||
TOTAL INVESTMENTS AT AMORTIZED COST | 97.2% | $1,497,210,883 | |||||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 2.8 | 42,338,968 | |||||||
NET ASSETS | 100.0% | $1,539,549,851 |
1 | Coupon represents a yield to maturity. |
2 | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at June 30, 2012 was $39,990,825 or 2.6% of net assets. |
3 | Variable rate demand note. The maturity dates reflect the demand repayment dates. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the June 30, 2012 coupon or interest rate. |
4 | Coupon represents a weighted average yield. |
Abbreviations:
FHLMC — Federal Home Loan Mortgage Corporation
FNMA — Federal National Mortgage Association.
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT JUNE 30, 2012 | 9 |
BBH MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) |
June 30, 2012 |
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including for example, the risk inherent in a particular valuation technique used to measure fair value including such pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The three levels defined by the fair value hierarchy are as follows:
— | Level 1 – Unadjusted quoted prices in active markets at the measurement date for identical securities. |
— | Level 2 – Other prices in markets that are not active or based on quoted prices for similar assets or liabilities, or for which all significant inputs are observable, directly or indirectly. |
— | Level 3 – Significant unobservable inputs (including the Fund’s own assumptions in determining the value of investments). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Investment Manager. The Investment Manager considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Investment Manager’s perceived risk of that instrument.
The accompanying notes are an integral part of these financial statements.
10 |
BBH MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) |
June 30, 2012 |
Financial assets whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities, exchange traded derivatives, U.S. government treasury bills and certain non-U.S. sovereign obligations. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations, listed equities and over-the counter derivatives. As level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and corporate debt securities. As observable prices are not available for these securities, valuation techniques are used to derive fair value. The Fund does not classify any holdings at level 3.
At June 30, 2012, 100% of the Fund’s investments were valued using amortized cost, in accordance with Rule 2a-7 under the Investment Company Act of 1940, as amended (“1940 Act”). Amortized cost approximates the fair value of a security, but since the value is not obtained from a quoted price in an active market, securities valued at amortized cost are considered to be valued using Level 2 inputs.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT JUNE 30, 2012 | 11 |
BBH MONEY MARKET FUND |
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of June 30, 2012.
Investments, at value | (Unadjusted) Quoted Prices in Active Markets for Identical Investments (Level 1)* | Significant Other Observable Inputs (Level 2)* | Significant Unobservable Inputs (Level 3)* | Balance as of June 30, 2012 | ||||||||||||
Certificates of Deposit | – | $ | 285,115,257 | – | $ | 285,115,257 | ||||||||||
Commercial Paper | – | 235,942,206 | – | 235,942,206 | ||||||||||||
Municipal Bonds | – | 213,309,000 | – | 213,309,000 | ||||||||||||
U.S. Government Agency | ||||||||||||||||
Obligations | – | 304,954,179 | – | 304,954,179 | ||||||||||||
U.S. Treasury Bills | – | 134,990,241 | – | 134,990,241 | ||||||||||||
Time Deposits | – | 167,900,000 | – | 167,900,000 | ||||||||||||
Repurchase Agreements | – | 155,000,000 | – | 155,000,000 | ||||||||||||
Total Investments, at value | – | $ | 1,497,210,883 | – | $ | 1,497,210,883 |
* | The Fund’s policy is to disclose transfers between levels based on valuations at the end of the reporting period. There were no transfers between Levels 1, 2 or 3 as of June 30, 2012, based on the valuation input levels on June 30, 2011. |
The accompanying notes are an integral part of these financial statements.
12 |
BBH MONEY MARKET FUND |
STATEMENT OF ASSETS AND LIABILITIES |
June 30, 2012 |
ASSETS: | ||
Investments (including repurchase agreements of $155,000,000) | $ | 1,497,210,883 |
Cash | 12,889 | |
Receivables for: | ||
Investments sold | 42,546,088 | |
Interest | 151,399 | |
Prepaid assets | 30,922 | |
Total Assets | 1,539,952,181 | |
LIABILITIES: | ||
Payables for: | ||
Shareholder servicing fees | 103,789 | |
Custody and fund accounting fees | 79,814 | |
Professional fees | 59,435 | |
Investment advisory and administrative fees | 53,276 | |
Dividends declared | 22,396 | |
Transfer agent fees | 12,244 | |
Board of Trustees’ fees | 7,813 | |
Distribution fees | 3,862 | |
Accrued expenses and other liabilities | 59,701 | |
Total Liabilities | 402,330 | |
NET ASSETS | $ | 1,539,549,851 |
Net Assets Consist of: | ||
Paid-in capital | $ | 1,539,549,010 |
Accumulated net investment income | 841 | |
Net Assets | $ | 1,539,549,851 |
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||
REGULAR SHARES | ||
($1,005,967,429 ÷ 1,005,967,340 shares outstanding) | $1.00 | |
INSTITUTIONAL SHARES | ||
($533,582,422 ÷ 533,582,126 shares outstanding) | $1.00 |
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT JUNE 30, 2012 | 13 |
BBH MONEY MARKET FUND |
STATEMENT OF OPERATIONS |
For the year ended June 30, 2012 |
NET INVESTMENT INCOME: | |||
Income: | |||
Interest and other income | $ | 2,979,836 | |
Expenses: | |||
Investment advisory and administrative fees | 4,090,743 | ||
Shareholder servicing fees | 2,937,399 | ||
Custody and fund accounting fees | 279,303 | ||
Board of Trustees’ fees | 110,301 | ||
Professional fees | 81,523 | ||
Distribution fees | 32,087 | ||
Transfer agent fees | 30,082 | ||
Miscellaneous expenses | 206,414 | ||
Total Expenses | 7,767,852 | ||
Expense offset arrangement | (2,548 | ) | |
Investment advisory and administrative fee/shareholder servicing | |||
fee waivers | (4,946,841 | ) | |
Net Expenses | 2,818,463 | ||
Net Investment Income | 161,373 | ||
NET REALIZED GAIN: | |||
Net realized gain on investments | 18,684 | ||
Net Increase in Net Assets Resulting from Operations | $ | 180,057 |
The accompanying notes are an integral part of these financial statements.
14 |
BBH MONEY MARKET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the years ended June 30, | |||||||
2012 | 2011 | ||||||
INCREASE IN NET ASSETS: | |||||||
Operations: | |||||||
Net investment income | $ | 161,373 | $ | 325,887 | |||
Net realized gain on investments | 18,684 | 40,686 | |||||
Net increase in net assets resulting | |||||||
from operations | 180,057 | 366,573 | |||||
Distributions declared: | |||||||
From net investment income: | |||||||
Regular Shares | (117,846 | ) | (115,551 | ) | |||
Institutional Shares | (62,211 | ) | (249,577 | ) | |||
Total distributions declared | (180,057 | ) | (365,128 | ) | |||
From Fund Share (Principal) Transactions at | |||||||
Net Asset Value of $1.00 per share: | |||||||
Fund shares sold | 5,100,619,574 | 5,322,333,165 | |||||
Fund shares issued in connection with | |||||||
reinvestments of dividends | 44,416 | 130,937 | |||||
Fund shares repurchased | (5,273,969,462 | ) | (5,312,002,132 | ) | |||
Net increase (decrease) in net assets resulting from | |||||||
fund share transactions | (173,305,472 | ) | 10,461,970 | ||||
Total increase (decrease) in net assets | (173,305,472 | ) | 10,463,415 | ||||
NET ASSETS: | |||||||
Beginning of year | 1,712,855,323 | 1,702,391,908 | |||||
End of year (including accumulated net investment | |||||||
income and distributions in excess of net investment | |||||||
income of $841 and $(298), respectively) | $ | 1,539,549,851 | $ | 1,712,855,323 |
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT JUNE 30, 2012 | 15 |
BBH MONEY MARKET FUND |
FINANCIAL HIGHLIGHTS |
Selected per share data and ratios for a Regular Share outstanding throughout each year |
For the years ended June 30, | |||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value, beginning of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||
Income from investment operations: | |||||||||||||||||||
Net investment income1 | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | 0.01 | 0.04 | |||||||||||
Distributions to shareholders from net | |||||||||||||||||||
investment income | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | (0.01 | ) | (0.04 | ) | |||||||||
Net asset value, end of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||
Total return | 0.01 | % | 0.01 | % | 0.01 | % | 1.10 | % | 3.77 | % | |||||||||
Ratios/Supplemental data: | |||||||||||||||||||
Net assets, end of year (in millions) | $ | 1,006 | $ | 1,119 | $1,116 | $ | 1,717 | $ | 1,409 | ||||||||||
Ratio of expenses to average net assets | |||||||||||||||||||
before reductions | 0.52 | % | 0.52 | % | 0.51 | % | 0.52 | % | 0.51 | % | |||||||||
Expense reimbursement | 0.36 | %3 | 0.23 | %3 | 0.10 | %3 | – | – | |||||||||||
Expense offset arrangement | 0.00 | %4 | 0.00 | %4 | 0.00 | %4 | 0.00 | %4 | 0.00 | %4 | |||||||||
Ratio of expenses to average net assets | |||||||||||||||||||
net of reductions | 0.16 | % | 0.29 | % | 0.41 | % | 0.52 | % | 0.51 | % | |||||||||
Ratio of net investment income to | |||||||||||||||||||
average net assets | 0.01 | % | 0.01 | % | 0.00 | %4 | 1.07 | % | 3.63 | % |
1 | Calculated using average shares outstanding for the year. |
2 | Less then 0.01 per share. |
3 | During the fiscal years ended June 30, 2012, 2011, and 2010 the investment advisory and administrative fee/shareholder servicing fee waivers, as a result of a minimum yield agreement, were $4,247,736, $2,665,689 and $1,444,177, respectively. |
4 | Less than 0.01%. |
The accompanying notes are an integral part of these financial statements.
16 |
BBH MONEY MARKET FUND |
FINANCIAL HIGHLIGHTS (continued) |
Selected per share data and ratios for an Institutional Share outstanding throughout each year
For the years ended June 30, | |||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
Net asset value, beginning of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||
Income from investment operations: | |||||||||||||||||||
Net investment income1 | 0.00 | 2 | 0.01 | 0.00 | 2 | 0.01 | 0.04 | ||||||||||||
Distributions to shareholders from net | |||||||||||||||||||
investment income | 0.00 | 2 | (0.01 | ) | 0.00 | 2 | (0.01 | ) | (0.04 | ) | |||||||||
Net asset value, end of year | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||
Total return | 0.01 | % | 0.04 | % | 0.16 | % | 1.35 | % | 4.02 | % | |||||||||
Ratios/Supplemental data: | |||||||||||||||||||
Net assets, end of year (in millions) | $ | 534 | $ | 594 | $ | 586 | $ | 989 | $ | 765 | |||||||||
Ratio of expenses to average net assets | |||||||||||||||||||
before reductions | 0.27 | % | 0.27 | % | 0.26 | % | 0.27 | % | 0.26 | % | |||||||||
Expense reimbursement | 0.11 | %3 | 0.01 | %3 | – | – | – | ||||||||||||
Expense offset arrangement | 0.00 | %4 | 0.00 | %4 | 0.00 | %4 | 0.00 | %4 | 0.00 | %4 | |||||||||
Ratio of expenses to average net assets | |||||||||||||||||||
net of reductions | 0.16 | % | 0.26 | % | 0.26 | % | 0.27 | % | 0.26 | % | |||||||||
Ratio of net investment income to | |||||||||||||||||||
average net assets | 0.01 | % | 0.04 | % | 0.16 | % | 1.29 | % | 3.86 | % |
1 | Calculated using average shares outstanding for the year. |
2 | Less then $0.01 per share. |
3 | During the fiscal years ended June 30, 2012 and 2011, the investment advisory and administrative fee waiver, as a result of a minimum yield agreement, were $699,105 and $61,661, respectively. |
4 | Less then 0.01%. |
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT JUNE 30, 2012 | 17 |
BBH MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS |
June 30, 2012 |
1. | Organization. The Fund is a separate series of BBH Trust (the “Trust”), which is registered under the 1940 Act, as an open-end management investment company. The Trust was originally organized as a Massachusetts business trust on June 7, 1983 and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on December 12, 1983. The Declaration of Trust permits the Board of Trustees of the Trust (the “Board”) to create an unlimited number of series, each of which may issue a separate class of shares. The Fund currently offers two classes of shares, Regular Shares and Institutional Shares. At June 30, 2012, there were four series of the Trust. |
2. | Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The following summarizes significant accounting policies of the Fund: |
A. | Valuation of Investments. The Fund values its investments at amortized cost, which approximates fair value. The amortized cost method values a security at its cost at the time of purchase and thereafter assumes a constant amortization to maturity of any discount or premium. The Fund’s use of amortized cost is in compliance with Rule 2a-7 of the 1940 Act. In the event that security valuations do not approximate fair value, securities may be valued as determined in accordance with procedures adopted by the Board. |
B. | Accounting for Investments and Income. Investment transactions are accounted for on the trade date basis. Realized gains and losses on investment transactions are determined on the identified cost method. Interest income is accrued as earned and consists of interest accrued, accretion of discount on debt securities (including both original issue and market discount) and premium amortization on the investments of the Fund. |
C. | Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a Fund are apportioned amongst each Fund in the Trust equally. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known. |
D. | Repurchase Agreements. The Fund may enter into repurchase agreements. Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price normally is in excess of the purchase price, reflecting an agreed upon interest rate. The rate is effective for the period of time that assets of the Fund are invested in the agreement and is not related to the coupon rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the Investment Adviser. The Fund’s custodian or sub-custodian will take possession of the securities subject to repurchase agreements. The investment adviser, custodian or sub-custodian will monitor |
18 |
BBH MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) |
June 30, 2012 |
the value of the underlying security each day to ensure that the value of the security always equals or exceeds the repurchase price. Repurchase agreements are subject to credit risks. Information regarding repurchase agreements held by the Fund is included in the Portfolio of Investments.
E. | Federal Income Taxes. It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP. Accordingly, the amount of net investment income and net realized gain reported on these financial statements may differ from that reported on the Fund’s tax return due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified on the Statement of Assets & Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV. |
The Fund is subject to the provisions of ASC 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of June 30, 2012, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended June 30, 2012, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years.
F. | Dividends and Distributions to Shareholders. Dividends and distributions to shareholders are declared daily and paid monthly to shareholders. Distributions from net capital gains, if any, are generally declared and paid annually. The Fund declared dividends in the amounts of $117,846 and $62,211 to Regular and Institutional shareholders, respectively, during the year ended June 30, 2012. The tax character of distributions paid during the fiscal years ended June 30, 2012 and 2011 were as follows: |
Distributions paid from: | ||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Total distributions paid | |||||||||
2012 | : | $ | 180,057 | – | $ | 180,057 | $ | 180,057 | ||||
2011 | : | 365,128 | – | 365,128 | 365,128 |
FINANCIAL STATEMENT JUNE 30, 2012 | 19 |
BBH MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) |
June 30, 2012 |
As of June 30, 2012 and 2011, respectively, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed ordinary income | Undistributed long-term capital gains | Accumulated earnings | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total accumulated earnings/ (deficit) | ||||||||||||||||
2012 | : | $36,034 | – | $36,034 | – | $(35,193 | ) | – | $ 841 | |||||||||||||
2011 | : | 21,417 | – | 21,417 | – | – | – | 21,417 |
As of June 30, 2012, the Fund did not have a capital loss carryforward.
Under the recently enacted Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period and will retain their character as either short-term or long-term capital losses rather than being considered all short term capital losses.
Total distributions paid for tax purposes may differ from the amounts shown in the Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
To the extent future capital gains are offset by future capital loss carryforwards, such gains will not be distributed.
G. | Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from these estimates. |
3. | Recent Accounting Pronouncements. In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” The ASU establishes common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards (“IFRS”) and is effective for interim and annual periods beginning after December 15, 2011. Management adopted ASU No. 2011-04 effective January 1, 2012 and has concluded that the adoption of ASU No. 2011-04 does not have a material impact on the Fund’s financial statements and the accompanying notes. |
In April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This
20 |
BBH MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) |
June 30, 2012 |
ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 did not have a material impact on the Fund’s financial statements and the accompanying notes, net assets or results of operations.
4. | Fees and Other Transactions with Affiliates. |
A. | Investment Advisory and Administrative Fees. Effective June 12, 2007, under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”), provides investment advisory and portfolio management services to the Fund. BBH also provides administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and incurred monthly at an annual rate equivalent to 0.25% on the first $1,000,000,000 of the Fund’s average daily net assets and 0.20% of the Fund’s average daily net assets in excess of $1,000,000,000. For the year ended June 30, 2012, the Fund incurred $4,090,743 for services under the Agreement. |
B. | Investment Advisory and Administrative Fee Waiver. Effective July 6, 2009, the SID voluntarily began to waive its Investment Advisory and Administrative Fee and credit daily to the Fund an amount which would maintain the minimum daily yield of the Fund at 1 basis point (0.01%). The amount credited each day would be an offset to the daily accrual of the Investment Advisory and Administrative Fee. This is a voluntary waiver that can be changed at any time at the sole discretion of the SID. For the year ended June 30, 2012, the SID waived fees in the amount of $2,676,417 and $699,105 for Regular Shares and Institutional Shares, respectively. |
C. | Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Regular Shares Class of the Fund calculated daily and incurred monthly at an annual rate of 0.25% of the Regular Share Class average daily net assets. For the year ended June 30, 2012, the Regular Shares Class of the Fund incurred $2,937,399 in shareholder servicing fees. |
D. | Shareholder Servicing Fee Waiver. Effective May 1, 2010, BBH voluntarily began to waive its Shareholder Servicing Fee for the Regular Shares only when the Investment Advisory and Administrative Fee waiver is not enough to maintain the minimum daily yield of the Fund at 1 basis point (0.01%). The amount credited each day would be an offset to the daily accrual of the Shareholder Servicing Fee. This is a voluntary waiver that can be changed at any time at the sole discretion of BBH. For the year ended June 30, 2012, BBH waived fees in the amount of $1,571,319. |
E. | Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s average daily net asset value. The |
FINANCIAL STATEMENT JUNE 30, 2012 | 21 |
BBH MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) |
June 30, 2012 |
custody fee is an asset and transaction based fee. The fund accounting fee is an asset based fee calculated at 0.01% per annum on the first $1,000,000,000 of average daily net assets and, 0.005% per annum on all assets over $1,000,000,000. For the year ended June 30, 2012, the Fund incurred $279,303 in custody and fund accounting fees. These fees for the Fund were reduced by $2,548 as a result of an expense offset arrangement with the Fund’s custodian. The credit amount is disclosed in the Statement of Operations as a reduction to the Fund’s expenses. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the Federal Funds overnight investment rate on the day of the overdraft. The total interest incurred by the Fund to cover overdrafts for the year ended June 30, 2012, was $3,385.
F. | Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee and reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended June 30, 2012, the Fund incurred $110,301 in non-interested Trustee compensation and reimbursements. |
5. | Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Regular Shares and Institutional Shares of beneficial interest, at no par value. Transactions in Regular Shares and Institutional Shares were as follows: |
For the year ended June 30, 2012 | For the year ended June 30, 2011 | |||||||||||||
Shares | Dollars | �� | Shares | Dollars | ||||||||||
Regular Shares | ||||||||||||||
Shares sold | 3,412,557,112 | $ | 3,412,557,112 | 3,061,959,187 | $ | 3,061,959,187 | ||||||||
Shares issued in | ||||||||||||||
connection with | ||||||||||||||
reinvestments | ||||||||||||||
of dividends | 13,772 | 13,772 | 15,895 | 15,895 | ||||||||||
Shares repurchased | (3,525,764,066 | ) | (3,525,764,066 | ) | (3,058,854,109 | ) | (3,058,854,109 | ) | ||||||
Net increase (decrease) | (113,193,182 | ) | $ | (113,193,182 | ) | 3,120,973 | $ | 3,120,973 | ||||||
Institutional Shares | ||||||||||||||
Shares sold | 1,688,062,462 | $ | 1,688,062,462 | 2,260,373,978 | $ | 2,260,373,978 | ||||||||
Shares issued in | ||||||||||||||
connection with | ||||||||||||||
reinvestments | ||||||||||||||
of dividends | 30,644 | 30,644 | 115,042 | 115,042 | ||||||||||
Shares repurchased | (1,748,205,396 | ) | (1,748,205,396 | ) | (2,253,148,023 | ) | (2,253,148,023 | ) | ||||||
Net increase (decrease) | (60,112,290 | ) | $ | (60,112,290 | ) | 7,340,997 | $ | 7,340,997 |
22 |
BBH MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) |
June 30, 2012 |
6. | Principal Risk Factors and Indemnifications. |
A. | Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below: |
A shareholder may lose money by investing in the Fund. In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk), failure of a counterparty to a transaction to perform (credit risk), changes in interest rates (interest rate risk), financial performance or leverage of the issuer (issuer risk), difficulty in being able to purchase or sell a security (liquidity risk) risks associated with investing a significant portion of its assets in government securities, certain municipal securities and U.S. bank obligations (concentration risks) or certain risks associated with investing in foreign securities not present in domestic investments (foreign investment risk). The value of securities held by the Fund may decline in response to certain events, including those directly involving the companies whose securities are held by the Fund; conditions affecting the general economy; overall market changes; local, regional or political, social or economic instability; and currency and interest rate and price fluctuations. The Fund’s exposure to these risks with respect to these financial assets held by the Fund is reflected in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
B. | Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote. |
7. | Subsequent Events. Management has evaluated events and transactions that may have occurred since June 30, 2012 through the date the financial statements were issued, that would merit recognition or additional disclosure in the financial statements. During this review nothing was discovered which would require disclosure within or adjustment to the financial statements. |
FINANCIAL STATEMENT JUNE 30, 2012 | 23 |
BBH MONEY MARKET FUND |
DISCLOSURE OF FUND EXPENSES |
June 30, 2012 (unaudited) |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2012 to June 30, 2012).
ACTUAL EXPENSES
The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
24 |
BBH MONEY MARKET FUND |
DISCLOSURE OF FUND EXPENSES (continued) |
June 30, 2012 (unaudited) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value January 1, 2012 | Ending Account Value June 30, 2012 | Expenses Paid During Period January 1, 2012 to June 30, 20121 | ||||||
Regular Shares | ||||||||
Actual | $1,000 | $1,000 | $0.85 | |||||
Hypothetical2 | $1,000 | $1,024 | $0.86 | |||||
Expenses Paid | ||||||||
Beginning | Ending | During Period | ||||||
Account Value | Account Value | January 1, 2012 to | ||||||
January 1, 2012 | June 30, 2012 | June 30, 20121 | ||||||
Institutional Shares | ||||||||
Actual | $1,000 | $1,000 | $0.85 | |||||
Hypothetical2 | $1,000 | $1,024 | $0.86 |
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.17% and 0.17% for Regular and Institutional Shares, respectively, multiplied by 182/366 (to reflect the one half-year period). |
2 | Assumes a return of 5% before expenses. For the purpose of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses. |
FINANCIAL STATEMENT JUNE 30, 2012 | 25 |
BBH MONEY MARKET FUND |
CONFLICTS OF INTEREST |
June 30, 2012 (unaudited) |
Conflicts of Interest
Certain conflicts of interest may arise in connection with a portfolio manager’s management of the Fund’s investments, on the one hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them.
Other potential conflicts might include conflicts between the Fund and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the Investment Adviser, BBH provides administrative, custody, fund accounting, and securities lending services to the Fund. BBH may have conflicting duties of loyalty while servicing the Fund and/or opportunities to further its own interest to the detriment of the Fund. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. Also, because its advisory fees are calculated by reference to the Fund’s average daily net assets, the Investment Adviser and its affiliates may have an incentive to seek to overvalue certain assets.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to administration of investment advice and valuation of securities. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees.
BBH, including the Investment Adviser, seeks to meet its fiduciary obligation with respect to all clients including the Fund. BBH has adopted and implemented policies and procedures that seek to manage conflicts. The Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, review of allocation decisions, the investment in only those securities within the parameters of which have been approved for purchase by an oversight committee, and compliance with the Investment Adviser’s Code of Ethics. With respect to the allocation of investment opportunities, BBH has adopted and implemented policies designed to achieve fair and equitable allocation of investment opportunities among its clients over time. BBH has structured the portfolio managers’ compensation in a manner it believes is reasonably designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.
26 |
BBH MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) |
June 30, 2012 (unaudited) |
The Trust also manages these conflicts. For example, the Fund has designated a chief compliance officer and has adopted and implemented policies and procedures designed to address the conflicts identified above and other conflicts that may arise in the course of the Fund’s operations in such a way as to safeguard the Fund from being negatively affected as a result of any such potential conflicts. The Trustees receive regular reports from the Investment Adviser and the Fund’s chief compliance officer on areas of potential conflict.
FINANCIAL STATEMENT JUNE 30, 2012 | 27 |
BBH MONEY MARKET FUND |
ADDITIONAL FEDERAL TAX INFORMATION |
June 30, 2012 (unaudited) |
In January 2012, the Fund reported on Form 1099 the tax status of all distributions made during the calendar year 2011. Shareholders should use the information on Form 1099 for their income tax returns.
28 |
TRUSTEES AND OFFICERS OF BBH MONEY MARKET FUND |
(unaudited) |
Information pertaining to the Trustees of the BBH Trust (the “Trust”) and executive officers of the Trust is set forth below. The Statement of Additional Information for the BBH Money Market Fund includes additional information about the Fund’s Trustees and is available upon request without charge by contacting the Fund at 1-800-625-5759.
Name and Birth Date | Position(s) Held with the Trust | Term of Office# and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Directorships Held by Trustee During Past 5 Years |
Independent Trustees | |||||
Joseph V. Shields Jr. | Chairman | Since 2007 | Managing Director and Chairman of | 4 | Chairman of |
Birth Date: | of the | 1990–2007 | Wellington Shields & Co. LLC | Capital | |
March 17, 1938 | Board and | with the | (member of New York Stock | Management | |
Trustee | Predecessor | Exchange (“NYSE”)) | Associates, Inc. | ||
Trust | (registered | ||||
investment | |||||
adviser); | |||||
Director of | |||||
Flowers Foods, | |||||
Inc. (NYSE listed | |||||
company). | |||||
David P. Feldman | Trustee | Since 2007 | Retired. | 4 | Director of |
Birth Date: | 1990–2007 | Dreyfus Mutual | |||
November 16, 1939 | with the | Funds | |||
Predecessor | (59 Funds). | ||||
Trust | |||||
Arthur D. Miltenberger | Trustee | Since 2007 | Retired. | 4 | None |
Birth Date: | 1992–2007 | ||||
November 8, 1938 | with the | ||||
Predecessor | |||||
Trust | |||||
H. Whitney Wagner | Trustee | Since 2007 | President, Clear Brook Advisors, a | 4 | None |
Birth Date: | 2006–2007 | registered investment advisor. | |||
March 3, 1956 | with the | ||||
Predecessor | |||||
Trust | |||||
Andrew S. Frazier | Trustee | Since 2010 | Consultant to Western World | 4 | Director of |
Birth Date: | Insurance Group, Inc. (“WWIG”) | WWIG | |||
April 8, 1948 | (January 2010 — January 2012) | ||||
President and CEO of Western | |||||
World Insurance Group, Inc. | |||||
(1992–2009). |
FINANCIAL STATEMENT JUNE 30, 2012 | 29 |
TRUSTEES AND OFFICERS OF BBH MONEY MARKET FUND |
(unaudited) |
Name and Birth Date | Position(s) Held with Trust | Term of Office# and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee^ | Other Directorships Held by Trustee During Past 5 Years |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment | 4 | Chairman of |
Birth Date: | Advisory Incorporated, a registered | Dillon Trust | |||
November 8, 1956 | investment advisor. | Company; | |||
Chairman of | |||||
Keswick | |||||
Management; | |||||
Director of | |||||
Domaine | |||||
Clarence Dillon, | |||||
Bordeaux, | |||||
France; and | |||||
Director of | |||||
Pinnacle Care | |||||
International. | |||||
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior | 4 | None |
Birth Date: | Client Advocate (since 2010) for | ||||
February 18, 1957 | BBH&Co., Director of BBH | ||||
40 Water Street | Luxembourg S.C.A. (since 1992); | ||||
Boston, MA 02109 | Director of BBH Trust Company | ||||
(Cayman) Ltd. (2007 to April 2011); | |||||
and BBH Investor Services (London) | |||||
Ltd (2001 to April 2011). | |||||
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. | 4 | None |
140 Broadway | (2012–present); General Partner of | ||||
New York, NY 10005 | BBH&Co. (1998 to 2011); President | ||||
Birth Date: | and Principal Executive Officer of | ||||
April 11, 1959 | the Trust (2008–2011). | ||||
Officers | |||||
Radford W. Klotz | President | Since 2011 | Joined BBH&Co. in 1977 and has | N/A | N/A |
140 Broadway | and | been a Partner of the firm since | |||
New York, NY 10005 | Principal | 1995. | |||
Birth Date: | Executive | ||||
December 1, 1955 | Officer | ||||
Charles H. Schreiber | Treasurer | Since 2007 | Senior Vice President of BBH&Co. | N/A | N/A |
140 Broadway | and | 2006–2007 | since September 2001; joined | ||
New York, NY 10005 | Principal | with the | BBH&Co. in 1999. | ||
Birth Date: | Financial | Predecessor | |||
December 10, 1957 | Officer | Trust |
30 |
TRUSTEES AND OFFICERS OF BBH MONEY MARKET FUND |
(unaudited) |
Name and Birth Date | Position(s) Held with Trust | Term of Office# and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Funds in Fund Complex Overseen by Trustee^ | Other Directorships Held by Trustee During Past 5 Years |
Mark B. Nixon | Assistant | Since 2007 | Vice President of BBH&Co. (since | N/A | N/A |
140 Broadway | Secretary | 2006–2007 | October 2006). | ||
New York, NY 10005 | with the | ||||
Birth Date: | Predecessor | ||||
January 14, 1963 | Trust | ||||
Mark A. Egert | Chief | Since 2011 | CCO for Brown Brothers Harriman & | N/A | N/A |
140 Broadway | Compliance | Co. (June 2011–present); Partner at | |||
New York, NY 10005 | Officer | Crowell & Moring LLP (from April | |||
Birth Date: | (“CCO”) | 2010 to May 2011); CCO of Cowen | |||
May 25, 1962 | and Company (from January 2005 to | ||||
April 2010). | |||||
Sue M. Rim-An | Anti- | Since 2008 | Anti-Money Laundering (“AML”) | N/A | N/A |
140 Broadway | Money | Officer, Vice President of BBH&Co. | |||
New York, NY 10005 | Laundering | (September 2007–present); AML | |||
Birth Date: | Officer | Officer at UBS Investment Bank | |||
September 10, 1970 | (April 2006–August 2007). | ||||
Suzan Barron | Secretary | Since 2009 | Senior Vice President and Senior | N/A | N/A |
50 Milk Street | Investor Services Counsel, | ||||
Boston, MA 02109 | Corporate Secretary and Regulatory | ||||
Birth Date: | Support Practice of Fund | ||||
September 5, 1964 | Administration, BBH&Co. since | ||||
November 2005. | |||||
Alexander Tikonoff | Assistant | Since 2009 | Assistant Vice President and | N/A | N/A |
50 Milk Street | Secretary | Investor Services Counsel, BBH&Co. | |||
Boston, MA 02109 | (since August 2006). | ||||
Birth Date: | |||||
December 23, 1974 | |||||
Rowena Rothman | Assistant | Since 2011 | Vice President of BBH&Co. (since | N/A | N/A |
140 Broadway | Treasurer | 2009); Finance and Accounting | |||
New York, NY 10005 | Consultant at The Siegfried Group | ||||
Birth Date: | (2007–2009). | ||||
October 24, 1967 |
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-Laws). Except for Ms. Livingston, Mr. Collins, and Mr. Frazier, the Trustees previously served on the Board of Trustees of the Predecessor Trust. |
^ | The Fund Complex consists of the Trust, which has four series, and each series is counted as one “Fund” for purposes of this table. |
FINANCIAL STATEMENT JUNE 30, 2012 | 31 |
ADMINISTRATOR | INVESTMENT ADVISER |
BROWN BROTHERS HARRIMAN & CO. | BROWNBROTHERS HARRIMAN |
140 BROADWAY | MUTUAL FUND ADVISORY |
NEW YORK, NY 10005 | DEPARTMENT |
140 BROADWAY | |
DISTRIBUTOR | NEW YORK, NY 10005 |
ALPS DISTRIBUTORS, INC. | |
1290 BROADWAY, SUITE 1100 | |
DENVER, CO 80203 | |
SHAREHOLDER SERVICING AGENT | |
BROWN BROTHERS HARRIMAN & CO. | |
140 BROADWAY | |
NEW YORK, NY 10005 | |
(800) 625-5759 |
To obtain information or make shareholder inquiries: | |
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. Such offering is made only by the prospectus, which includes details as to offering price and other material information.
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” Information on Form N-Q is available without charge and upon request by calling the Funds at the toll-free number listed above. A text only version can be viewed online or downloaded from the SEC’s website at http://www.sec.gov; and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (call 1-800-SEC-0330 for information on the operation of the Public Reference Room). You may also access this information from the BBH Funds website at www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available upon request by calling the toll-free number listed above. This information is also available from the Edgar database on the SEC’s website at www.sec.gov.
Item 2. Code of Ethics.
As of the period ended June 30, 2012 (the “Reporting Period”), the Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer and principal financial officer, principal accounting officer or controller or persons performing similar functions. During the Reporting Period, there have been no changes to, amendments to or waivers from, any provision of the code of ethics. A copy of this code of ethics can be obtained upon request, free of charge, by calling (800) 625-5759. |
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Registrant has determined that Arthur D. Miltenberger, David P. Feldman and Andrew S. Frazier possess the attributes identified in Instruction (b) of Item 3 to Form N-CSR to each qualify as an “audit committee financial expert,” and has designated Arthur D. Miltenberger, David P. Feldman and Andrew S. Frazier as the Registrant’s audit committee financial experts. Messrs. Arthur D. Miltenberger, David P. Feldman and Andrew S. Frazier are “independent” Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. |
Item 4. Principal Accountant Fees and Services.
(a) | Audit Fees The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $26,000 for 2012 and $26,000 for 2011.
|
(b) | Audit Related Fees The aggregate fees billed in each of the last two fiscal years for assurance and related services rendered to the Registrant by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2012 and $0 for 2011.
|
(c) | Tax Fees The aggregate fees billed in each of the last two fiscal years for professional services rendered to the Registrant by the principal accountant for tax compliance, tax advice and tax planning were $3,200 for 2012 and $3,200 for 2011. These services consisted of: (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local entity tax planning, advice and assistance regarding statutory, regulatory or administrative developments; and (iii) tax advice regarding tax qualification.
|
(d) | All Other Fees The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $6,900 for 2012 and $6,900 for 2011.
The other services provided to the Registrant consisted of examinations pursuant to Rule 17f-2 of the Investment Company Act of 1940, as amended and filings of Form N-17f-2 “Certificate of Accounting of Securities and Similar Investments in the Custody of Management Investment Companies” with the U.S. Securities and Exchange Commission (“17f-2 Services”) in addition to audit services, tax services and 17f-2 Services provided to other series of the Registrant.
|
(e)(1) | Pursuant to the Registrant’s Audit Committee Charter that has been adopted by the audit committee, the audit committee shall approve all audit and permissible non-audit services to be provided to the Registrant and all permissible non-audit services to be provided to its investment adviser or any entity controlling, controlled by or under common control with the investment adviser that provides on-going services to the Registrant if the engagement relates directly to the operations and financial reporting of the Registrant. The audit committee has delegated to its Chairman the approval of such services subject to reports to the full audit committee at its next subsequent meeting.
|
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, with respect to: Audit-Related Fees were 0%; Tax Fees were 0%; and Other Fees were 0%.
|
(f) | Not applicable
|
(g) | The aggregate non-audit fees billed by the Registrant's accountant for services rendered to the Registrant, and rendered to the Registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant for each of the last two fiscal years of the Registrant were $897,142 for 2012 and $1,038,432 for 2011.
|
(h) | The Registrant’s audit committee has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed Registrants.
Not applicable. |
Item 6. Investments.
(a) | A Schedule of Investments in securities of unaffiliated issuers as of the close of the Reporting Period is included as part of the report to shareholders filed under Item 1 of this Form N-CSR.
|
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable. |
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable. |
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable. |
Item 11. Controls and Procedures.
(a) | The Registrant’s principal executive and financial officers have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective, as of a date within 90 days of the filing date of this Form N-CSR, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
|
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the Registrant's second fiscal quarter of the period covered by this Form N-CSR, that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) | Not applicable.
|
(a)(2) | Certifications required by Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibit 12(a)(2) to this Form N-CSR.
|
(a)(3) | Not applicable. |
(b) | Certifications required by Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are furnished as Exhibit 12(b) to this Form N-CSR. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) BBH Trust
By: (Signature and Title)
/s/ Radford W. Klotz ��
Radford W. Klotz
Title: President (Principal Executive Officer)
Date: August 31, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: (Signature and Title)
/s/ Radford W. Klotz
Radford W. Klotz
Title: President (Principal Executive Officer)
Date: August 31, 2012
By: (Signature and Title)
/s/ Charles H. Schreiber
Charles H. Schreiber
Title: Treasurer (Principal Financial Officer)
Date: August 31, 2012