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) 575-1265
Date of fiscal year end: June 30
Date of reporting period: December 31, 2012
Item 1. Report to Stockholders.
Semi-Annual Report
DECEMBER 31, 2012
BBH Money Market Fund
| BBH MONEY MARKET FUND |
| PORTFOLIO ALLOCATION |
| December 31, 2012 (unaudited) |
BREAKDOWN BY SECURITY TYPE
| U.S. $ Value | Percent of Net Assets | |||||||
| Certificates of Deposit | $ | 340,208,783 | 16.2 | % | ||||
| Commercial Paper | 154,962,358 | 7.4 | ||||||
| Municipal Bonds | 180,765,000 | 8.6 | ||||||
| U.S. Government Agency Obligations | 524,947,002 | 24.9 | ||||||
| U.S. Treasury Bills | 579,960,820 | 27.5 | ||||||
| Time Deposits | 184,900,000 | 8.8 | ||||||
| Repurchase Agreements | 135,000,000 | 6.4 | ||||||
| Cash and Other Assets in Excess of Liabilities | 4,740,155 | 0.2 | ||||||
| NET ASSETS | $ | 2,105,484,118 | 100.0 | % | ||||
All data as of December 31, 2012. The BBH Money Market Fund’s (the “Fund”) 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.
| 2 |
| BBH MONEY MARKET FUND |
| PORTFOLIO OF INVESTMENTS |
| December 31, 2012 (unaudited) |
| Principal Amount | Maturity Date | Interest Rate | Value | |||||
| CERTIFICATES OF DEPOSIT (16.2%) | ||||||||
| $ 21,500,000 | Australia & New Zealand Banking | |||||||
| Group Ltd. | 03/12/13 | 0.200% | $ 21,500,835 | |||||
| 25,200,000 | Australia & New Zealand Banking | |||||||
| Group Ltd. | 03/20/13 | 0.200 | 25,200,000 | |||||
| 25,000,000 | Bank of Montreal | 02/11/13 | 0.310 | 25,003,126 | ||||
| 20,000,000 | Bank of Montreal | 03/05/13 | 0.220 | 20,000,000 | ||||
| 30,000,000 | Bank of Nova Scotia | 01/10/13 | 0.180 | 30,000,000 | ||||
| 19,700,000 | Bank of Nova Scotia | 03/18/13 | 0.210 | 19,700,000 | ||||
| 40,000,000 | Bank of Tokyo-Mitsubishi UFJ Ltd. | 02/06/13 | 0.220 | 40,000,400 | ||||
| 10,000,000 | Bank of Tokyo-Mitsubishi UFJ Ltd. | 03/06/13 | 0.470 | 10,004,081 | ||||
| 40,100,000 | Barclays Bank, Plc | 03/08/13 | 0.210 | 40,100,000 | ||||
| 20,000,000 | DnB Bank ASA | 02/26/13 | 0.230 | 20,000,000 | ||||
| 25,600,000 | DnB Bank ASA | 03/12/13 | 0.230 | 25,600,000 | ||||
| 21,700,000 | Svenska Handelsbanken | 02/15/13 | 0.235 | 21,700,136 | ||||
| 21,400,000 | Svenska Handelsbanken | 03/11/13 | 0.235 | 21,400,205 | ||||
| 20,000,000 | UBS AG | 01/28/13 | 0.280 | 20,000,000 | ||||
| Total Certificates of Deposit | 340,208,783 | |||||||
| COMMERCIAL PAPER (7.4%) | ||||||||
| 30,000,000 | Deutsche Bank Financial LLC1 | 01/08/13 | 0.190 | 29,998,891 | ||||
| 20,000,000 | Deutsche Bank Financial LLC1 | 01/17/13 | 0.200 | 19,998,222 | ||||
| 35,000,000 | National Australia Funding | |||||||
| Delaware, Inc.1,2 | 02/04/13 | 0.220 | 34,992,728 | |||||
| 20,000,000 | National Australia Funding | |||||||
| Delaware, Inc.1,2 | 03/01/13 | 0.165 | 19,994,592 | |||||
| 20,000,000 | Rabobank USA Financial Corp.1 | 03/11/13 | 0.230 | 19,991,183 | ||||
| 30,000,000 | UBS Finance Delaware LLC1 | 03/28/13 | 0.185 | 29,986,742 | ||||
| Total Commercial Paper | 154,962,358 | |||||||
| MUNICIPAL BONDS (8.6%) | ||||||||
| 14,000,000 | California State Health Facilities | |||||||
| Financing Authority3 | 01/07/13 | 0.120 | 14,000,000 | |||||
| 9,290,000 | Charlotte, North Carolina3 | 01/07/13 | 0.110 | 9,290,000 | ||||
| 14,000,000 | Connecticut State Health & Educational | |||||||
| Facility Authority3 | 01/07/13 | 0.120 | 14,000,000 | |||||
The accompanying notes are an integral part of these financial statements.
| financial statement December 31, 2012 | 3 |
| BBH MONEY MARKET FUND |
| PORTFOLIO OF INVESTMENTS (continued) |
| December 31, 2012 (unaudited) |
| Principal Amount | Maturity Date | Interest Rate | Value | |||||
| MUNICIPAL BONDS (continued) | ||||||||
| $ 4,190,000 | Guilford County, North Carolina3 | 01/07/13 | 0.130% | $ 4,190,000 | ||||
| 5,345,000 | Houston, Texas, Higher Education | |||||||
| Finance Corp.3 | 01/07/13 | 0.130 | 5,345,000 | |||||
| 7,811,000 | Illinois State Finance Authority3 | 01/07/13 | 0.120 | 7,811,000 | ||||
| 9,830,000 | Illinois State Finance Authority3 | 01/07/13 | 0.150 | 9,830,000 | ||||
| 12,095,000 | Kansas State Department of | |||||||
| Transportation3 | 01/07/13 | 0.110 | 12,095,000 | |||||
| 13,824,000 | Massachusetts State Development | |||||||
| Finance Agency3 | 01/07/13 | 0.120 | 13,824,000 | |||||
| 12,100,000 | Massachusetts State Health & | |||||||
| Educational Facilities Authority3 | 01/07/13 | 0.090 | 12,100,000 | |||||
| 2,395,000 | New Hampshire State Health & Education | |||||||
| Facilities Authority3 | 01/07/13 | 0.110 | 2,395,000 | |||||
| 13,425,000 | New Hampshire State Health & Education | |||||||
| Facilities Authority3 | 01/07/13 | 0.150 | 13,425,000 | |||||
| 3,585,000 | New Jersey State Educational Facilities | |||||||
| Authority3 | 01/07/13 | 0.130 | 3,585,000 | |||||
| 4,520,000 | New York State Dormitory Authority3 | 01/07/13 | 0.120 | 4,520,000 | ||||
| 4,200,000 | North Carolina State Capital Facilities | |||||||
| Finance Agency3 | 01/07/13 | 0.100 | 4,200,000 | |||||
| 4,700,000 | State of Ohio3 | 01/07/13 | 0.130 | 4,700,000 | ||||
| 14,000,000 | Pennsylvania State Turnpike | |||||||
| Commission3 | 01/07/13 | 0.160 | 14,000,000 | |||||
| 6,200,000 | Private Colleges & Universities | |||||||
| Authority3 | 01/07/13 | 0.110 | 6,200,000 | |||||
| 11,600,000 | San Diego County, California, Regional | |||||||
| Transportation Commission3 | 01/07/13 | 0.120 | 11,600,000 | |||||
| 13,655,000 | University of Michigan3 | 01/07/13 | 0.100 | 13,655,000 | ||||
| Total Municipal Bonds | 180,765,000 | |||||||
| U.S. GOVERNMENT AGENCY | ||||||||
| OBLIGATIONS (24.9%) | ||||||||
| 70,000,000 | Fannie Mae Discount Notes1,4 | 01/02/13 | 0.120 | 69,999,767 | ||||
| 40,000,000 | Fannie Mae Discount Notes1,4 | 01/14/13 | 0.063 | 39,999,097 | ||||
| 20,000,000 | Fannie Mae Discount Notes1 | 01/23/13 | 0.090 | 19,998,900 | ||||
The accompanying notes are an integral part of these financial statements.
| 4 |
| BBH MONEY MARKET FUND |
| PORTFOLIO OF INVESTMENTS (continued) |
| December 31, 2012 (unaudited) |
| Principal Amount | Maturity Date | Interest Rate | Value | |||||
| $ 20,000,000 | Fannie Mae Discount Notes1 | 02/20/13 | 0.120% | $ 19,996,667 | ||||
| 25,000,000 | Fannie Mae Discount Notes1,4 | 03/27/13 | 0.086 | 24,994,924 | ||||
| 60,000,000 | Federal Home Loan Bank Discount | |||||||
| Notes1,4 | 01/16/13 | 0.135 | 59,996,625 | |||||
| 75,000,000 | Federal Home Loan Bank Discount | |||||||
| Notes1,4 | 01/23/13 | 0.100 | 74,995,417 | |||||
| 10,000,000 | Federal Home Loan Bank Discount | |||||||
| Notes1 | 03/06/13 | 0.080 | 9,998,578 | |||||
| 15,000,000 | Federal Home Loan Bank Discount | |||||||
| Notes1 | 03/08/13 | 0.110 | 14,996,975 | |||||
| 15,000,000 | Federal Home Loan Bank Discount | |||||||
| Notes1 | 03/20/13 | 0.080 | 14,997,400 | |||||
| 50,000,000 | Freddie Mac Discount Notes1 | 02/11/13 | 0.130 | 49,992,597 | ||||
| 75,000,000 | Freddie Mac Discount Notes1,4 | 02/19/13 | 0.117 | 74,988,056 | ||||
| 25,000,000 | Freddie Mac Discount Notes1 | 03/04/13 | 0.100 | 24,995,694 | ||||
| 25,000,000 | Freddie Mac Discount Notes1 | 03/18/13 | 0.070 | 24,996,305 | ||||
| Total U.S. Government Agency | ||||||||
| Obligations | 524,947,002 | |||||||
| U.S. TREASURY BILLS (27.5%) | ||||||||
| 100,000,000 | U.S. Treasury Bill1,4 | 01/10/13 | 0.080 | 99,998,000 | ||||
| 85,000,000 | U.S. Treasury Bill1,4 | 01/24/13 | 0.083 | 84,995,520 | ||||
| 85,000,000 | U.S. Treasury Bill1,4 | 02/14/13 | 0.075 | 84,992,208 | ||||
| 50,000,000 | U.S. Treasury Bill1 | 02/21/13 | 0.005 | 49,999,646 | ||||
| 85,000,000 | U.S. Treasury Bill1,4 | 02/28/13 | 0.090 | 84,987,675 | ||||
| 50,000,000 | U.S. Treasury Bill1 | 03/07/13 | 0.015 | 49,998,646 | ||||
| 50,000,000 | U.S. Treasury Bill1 | 03/14/13 | 0.010 | 49,999,000 | ||||
| 75,000,000 | U.S. Treasury Bill1,4 | 03/21/13 | 0.060 | 74,990,125 | ||||
| Total U.S. Treasury Bills | 579,960,820 | |||||||
| TIME DEPOSITS (8.8%) | ||||||||
| 69,900,000 | BNP Paribas | 01/02/13 | 0.030 | 69,900,000 | ||||
| 25,000,000 | Deutsche Bank AG | 01/02/13 | 0.100 | 25,000,000 | ||||
| 40,000,000 | Royal Bank of Canada | 01/02/13 | 0.050 | 40,000,000 | ||||
| 50,000,000 | Societe Generale | 01/02/13 | 0.150 | 50,000,000 | ||||
| Total Time Deposits | 184,900,000 | |||||||
The accompanying notes are an integral part of these financial statements.
| financial statement December 31, 2012 | 5 |
| BBH MONEY MARKET FUND |
| PORTFOLIO OF INVESTMENTS (continued) |
| December 31, 2012 (unaudited) |
| Principal Amount | Maturity Date | Interest Rate | Value | ||||
| REPURCHASE AGREEMENTS (6.4%) | |||||||
| $30,000,000 | BNP Paribas (Agreement dated 12/31/12 | ||||||
| collateralized by GNMA 2.320%-6.500%, | |||||||
| due 10/15/25-09/15/49, value $30,600,001) | 01/02/13 | 0.190% | $ 30,000,000 | ||||
| 20,000,000 | Deutsche Bank AG (Agreement dated | ||||||
| 12/31/12 collateralized by FNMA | |||||||
| 1.740%-3.150%, due 12/01/19-12/01/32, | |||||||
| value $20,400,000) | 01/02/13 | 0.250 | 20,000,000 | ||||
| 55,000,000 | Royal Bank of Canada (Agreement dated | ||||||
| 12/31/12 collateralized by FHLMC 4.000%, | |||||||
| due 12/01/40, value $56,100,001) | 01/02/13 | 0.180 | 55,000,000 | ||||
| 30,000,000 | Societe Generale SA (Agreement dated | ||||||
| 12/31/12 collateralized by FNMA 4.000%, | |||||||
| due 11/01/31, value $30,600,001) | 01/02/13 | 0.220 | 30,000,000 | ||||
| Total Repurchase Agreements | 135,000,000 | ||||||
| TOTAL INVESTMENTS AT AMORTIZED COST | 99.8% | $2,100,743,963 | |||||
| CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 0.2 | 4,740,155 | |||||
| NET ASSETS | 100.0% | $2,105,484,118 | |||||
| 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 December 31, 2012 was $54,987,320 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 December 31, 2012 coupon or interest rate. |
| 4 | Coupon represents a weighted average yield. |
Abbreviations:
FHLMC — Federal Home Loan Mortgage Corporation
FNMA — Federal National Mortgage Association.
GNMA — Government National Mortgage Association.
The accompanying notes are an integral part of these financial statements.
| 6 |
| BBH MONEY MARKET FUND |
| PORTFOLIO OF INVESTMENTS (continued) |
| December 31, 2012 (unaudited) |
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 a 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 for identical investments. |
| — | Level 2 – significant other observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.). |
| — | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair 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 adviser. The investment adviser 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 adviser’s perceived risk of that instrument.
The accompanying notes are an integral part of these financial statements.
| financial statement December 31, 2012 | 7 |
| BBH MONEY MARKET FUND |
| PORTFOLIO OF INVESTMENTS (continued) |
| December 31, 2012 (unaudited) |
Financial assets within level 1 are based on quoted market prices in active markets. 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 certain corporate debt securities. As observable prices are not available for these securities, valuation techniques are used to derive fair value.
At December 31, 2012, 100% of the Fund’s investments were valued using amortized cost, in accordance with rules under the Investment Company Act of 1940. 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.
| 8 |
| BBH MONEY MARKET FUND |
| PORTFOLIO OF INVESTMENTS (continued) |
| December 31, 2012 (unaudited) |
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of December 31, 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 December 31, 2012 | ||||||||||||
| Certificates of Deposit | — | $ | 340,208,783 | — | $ | 340,208,783 | ||||||||||
| Commercial Paper | — | 154,962,358 | — | 154,962,358 | ||||||||||||
| Municipal Bonds | — | 180,765,000 | — | 180,765,000 | ||||||||||||
| U.S. Government Agency | ||||||||||||||||
| Obligations | — | 524,947,002 | — | 524,947,002 | ||||||||||||
| U.S. Treasury Bills | — | 579,960,820 | — | 579,960,820 | ||||||||||||
| Time Deposits | — | 184,900,000 | — | 184,900,000 | ||||||||||||
| Repurchase Agreements | — | 135,000,000 | — | 135,000,000 | ||||||||||||
| Total Investments, | ||||||||||||||||
| at value | �� | — | $ | 2,100,743,963 | — | $ | 2,100,743,963 | |||||||||
| * | 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 December 31, 2012, based on the valuation input levels on June 30, 2012. |
The accompanying notes are an integral part of these financial statements.
| financial statement December 31, 2012 | 9 |
| BBH MONEY MARKET FUND |
| STATEMENT OF ASSETS AND LIABILITIES |
| December 31, 2012 (unaudited) |
| ASSETS: | ||||
| Investments (including repurchase agreements of $135,000,000) | $ | 2,100,743,963 | ||
| Cash | 95,437 | |||
| Receivables for: | ||||
| Shares sold | 24,238,185 | |||
| Interest | 139,736 | |||
| Prepaid assets | 10,725 | |||
| Total Assets | 2,125,228,046 | |||
| LIABILITIES: | ||||
| Payables for: | ||||
| Shares redeemed | 19,298,085 | |||
| Shareholder servicing fees | 104,150 | |||
| Professional fees | 73,398 | |||
| Custody and fund accounting fees | 68,428 | |||
| Investment advisory and administrative fees | 43,347 | |||
| Dividends declared | 24,008 | |||
| Board of Trustees’ fees | 12,609 | |||
| Transfer agent fees | 10,829 | |||
| Distribution fees | 6,576 | |||
| Accrued expenses and other liabilities | 102,498 | |||
| Total Liabilities | 19,743,928 | |||
| NET ASSETS | $ | 2,105,484,118 | ||
| Net Assets Consist of: | ||||
| Paid-in capital | $ | 2,105,483,853 | ||
| Accumulated net investment income | 265 | |||
| Net Assets | $ | 2,105,484,118 | ||
| NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||
| REGULAR SHARES | ||||
| ($1,580,615,752 ÷ 1,580,616,095 shares outstanding) | $ | 1.00 | ||
| INSTITUTIONAL SHARES | ||||
| ($524,868,366 ÷ 524,868,214 shares outstanding) | $ | 1.00 |
The accompanying notes are an integral part of these financial statements.
| 10 |
| BBH MONEY MARKET FUND |
| STATEMENT OF OPERATIONS |
| For the six months ended December 31, 2012 (unaudited) |
| NET INVESTMENT INCOME: | |||
| Income: | |||
| Interest and other income | $ | 1,378,094 | |
| Expenses: | |||
| Investment advisory and administrative fees | 1,966,468 | ||
| Shareholder servicing fees | 1,483,200 | ||
| Custody and fund accounting fees | 153,474 | ||
| Board of Trustees’ fees | 56,178 | ||
| Professional fees | 37,893 | ||
| Distribution fees | 14,841 | ||
| Transfer agent fees | 6,567 | ||
| Miscellaneous expenses | 91,540 | ||
| Total Expenses | 3,810,161 | ||
| Expense offset arrangement | (3,252 | ) | |
| Investment advisory and administrative fee/shareholder | |||
| servicing fee waivers | (2,506,781 | ) | |
| Net Expenses | 1,300,128 | ||
| Net Investment Income | $ | 77,966 | |
| NET REALIZED GAIN: | |||
| Net realized gain on investments | 7,683 | ||
| Net Increase in Net Assets Resulting from Operations | $ | 85,649 | |
The accompanying notes are an integral part of these financial statements.
| financial statement December 31, 2012 | 11 |
| BBH MONEY MARKET FUND |
| STATEMENTS OF CHANGES IN NET ASSETS |
| For the six months ended December 31, 2012 (unaudited) | For the year ended June 30, 2012 | |||||||
| INCREASE IN NET ASSETS: | ||||||||
| Operations: | ||||||||
| Net investment income | $ | 77,966 | $ | 161,373 | ||||
| Net realized gain on investments | 7,683 | 18,684 | ||||||
| Net increase in net assets resulting | ||||||||
| from operations | 85,649 | 180,057 | ||||||
| Distributions declared: | ||||||||
| From net investment income: | ||||||||
| Regular Shares | (59,761 | ) | (117,846 | ) | ||||
| Institutional Shares | (26,464 | ) | (62,211 | ) | ||||
| Total distributions declared | (86,225 | ) | (180,057 | ) | ||||
| From Fund Share (Principal) Transactions at | ||||||||
| Net Asset Value of $1.00 per share: | ||||||||
| Fund shares sold | 2,657,721,326 | 5,100,619,574 | ||||||
| Fund shares issued in connection with | ||||||||
| reinvestments of dividends | 8,131 | 44,416 | ||||||
| Fund shares repurchased | (2,091,794,614 | ) | (5,273,969,462 | ) | ||||
| Net increase (decrease) in net assets | ||||||||
| resulting from fund share transactions | 565,934,843 | (173,305,472 | ) | |||||
| Total increase (decrease) in net assets | 565,934,267 | (173,305,472 | ) | |||||
| NET ASSETS: | ||||||||
| Beginning of period | 1,539,549,851 | 1,712,855,323 | ||||||
| End of period (including accumulated net investment | ||||||||
| income of $265 and $841, respectively) | $ | 2,105,484,118 | $ | 1,539,549,851 | ||||
The accompanying notes are an integral part of these financial statements.
| 12 |
| BBH MONEY MARKET FUND |
| FINANCIAL HIGHLIGHTS | Selected per share data and ratios for a Regular Share outstanding throughout each period |
| For the six months ended December 31, 2012 (unaudited) | For the years ended June 30, | ||||||||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
| Net asset value, | |||||||||||||||||||||||
| beginning of period | $ | 1.00 | $ | 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 | 0.00 | 2 | 0.01 | 0.04 | |||||||||||||
| Distributions to shareholders from | |||||||||||||||||||||||
| net investment income | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | (0.01 | ) | (0.04 | ) | |||||||||||
| Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||
| Total return | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 1.10 | % | 3.77 | % | |||||||||||
| Ratios/Supplemental data: | |||||||||||||||||||||||
| Net assets, end of period | |||||||||||||||||||||||
| (in millions) | $ | 1,581 | $ | 1,006 | $ | 1,119 | $ | 1,116 | $ | 1,717 | $ | 1,409 | |||||||||||
| Ratio of expenses to average | |||||||||||||||||||||||
| net assets before reductions | 0.52 | %5 | 0.52 | % | 0.52 | % | 0.51 | % | 0.52 | % | 0.51 | % | |||||||||||
| Expense reimbursement | 0.37 | %3,5 | 0.36 | %3 | 0.23 | %3 | 0.10 | %3 | – | – | |||||||||||||
| Expense offset arrangement | 0.00 | %4,5 | 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 | 0.15 | %5 | 0.16 | % | 0.29 | % | 0.41 | % | 0.52 | % | 0.51 | % | |||||||||||
| Ratio of net investment income | |||||||||||||||||||||||
| to average net assets | 0.01 | %5 | 0.01 | % | 0.01 | % | 0.00 | %4 | 1.07 | % | 3.63 | % | |||||||||||
| 1 | Calculated using average shares outstanding for the period. |
| 2 | Less then 0.01 per share. |
| 3 | During the period ended December 31, 2012 and 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 $2,192,029, $4,247,736, $2,665,689 and $1,444,177, respectively. |
| 4 | Less than 0.01%. |
| 5 | Annualized. |
The accompanying notes are an integral part of these financial statements.
| financial statement December 31, 2012 | 13 |
| BBH MONEY MARKET FUND |
| FINANCIAL HIGHLIGHTS (continued) | Selected per share data and ratios for an Institutional Share outstanding throughout each period |
| For the six months ended December 31, 2012 (unaudited) | For the years ended June 30, | ||||||||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||
| Net asset value, | |||||||||||||||||||||||
| beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||
| Income from investment operations: | |||||||||||||||||||||||
| Net investment income1 | 0.00 | 2 | 0.00 | 2 | 0.01 | 0.00 | 2 | 0.01 | 0.04 | ||||||||||||||
| Distributions to shareholders from | |||||||||||||||||||||||
| net investment income | 0.00 | 2 | 0.00 | 2 | (0.01 | ) | 0.00 | 2 | (0.01 | ) | (0.04 | ) | |||||||||||
| Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||
| Total return | 0.01 | % | 0.01 | % | 0.04 | % | 0.16 | % | 1.35 | % | 4.02 | % | |||||||||||
| Ratios/Supplemental data: | |||||||||||||||||||||||
| Net assets, end of period | |||||||||||||||||||||||
| (in millions) | $ | 525 | $ | 534 | $ | 594 | $ | 586 | $ | 989 | $ | 765 | |||||||||||
| Ratio of expenses to average | |||||||||||||||||||||||
| net assets before reductions | 0.27 | %5 | 0.27 | % | 0.27 | % | 0.26 | % | 0.27 | % | 0.26 | % | |||||||||||
| Expense reimbursement | 0.12 | %3,5 | 0.11 | %3 | 0.01 | %3 | – | – | – | ||||||||||||||
| Expense offset arrangement | 0.00 | %4,5 | 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 | 0.15 | %5 | 0.16 | % | 0.26 | % | 0.26 | % | 0.27 | % | 0.26 | % | |||||||||||
| Ratio of net investment income | |||||||||||||||||||||||
| to average net assets | 0.01 | %5 | 0.01 | % | 0.04 | % | 0.16 | % | 1.29 | % | 3.86 | % | |||||||||||
| 1 | Calculated using average shares outstanding for the period. |
| 2 | Less then $0.01 per share. |
| 3 | During the period ended December 31, 2012 and the fiscal years ended June 30, 2012 and 2011, the investment advisory and administrative fee/shareholder servicing fee waivers, as a result of a minimum yield agreement, were $314,752, $699,105 and $61,661, respectively. |
| 4 | Less then 0.01%. |
| 5 | Annualized. |
The accompanying notes are an integral part of these financial statements.
| 14 |
| BBH MONEY MARKET FUND |
| NOTES TO FINANCIAL STATEMENTS |
| December 31, 2012 (unaudited) |
| 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 December 31, 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 |
| financial statement December 31, 2012 | 15 |
| BBH MONEY MARKET FUND |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| December 31, 2012 (unaudited) |
subject to repurchase agreements. The investment adviser, custodian or sub-custodian will monitor 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 policy of the Fund 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, the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in 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 Accounting Standards Codification (“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 December 31, 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 six months ended December 31, 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. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months
| 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 $59,761 and |
| 16 |
| BBH MONEY MARKET FUND |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| December 31, 2012 (unaudited) |
$26,464 to Regular and Institutional shareholders, respectively, during the six months ended December 31, 2012. The tax character of distributions paid during the fiscal years ended June 30, 2012 and 2011, respectively, 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 | |||||||
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 gain | 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 | ||||||||||||
The Fund did not have a net capital loss carry forward at June 30, 2012.
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. |
| financial statement December 31, 2012 | 17 |
| BBH MONEY MARKET FUND |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| December 31, 2012 (unaudited) |
| 3. | Recent Accounting Pronouncements. In December 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2011-11 “Disclosures about Offsetting Assets and Liabilities.” The amendments in this update require an entity to disclose both gross and net information for derivatives and other financial instruments that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The ASU is effective during interim or annual reporting periods beginning on or after January 1, 2013. Management is currently evaluating the implications of this ASU and its impact on the financial statements has not been determined. |
In May 2011, the FASB issued 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 FASB released 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 ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has adopted ASU No. 2011-03 effective January 1, 2012 and has concluded that ASU No. 2011-03 does not have a material impact on the Fund’s financial statements and the accompanying notes.
| 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 six months ended December 31, 2012, the Fund incurred $1,966,468 for services under the Agreement. |
| 18 |
| BBH MONEY MARKET FUND |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| December 31, 2012 (unaudited) |
| 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 six months ended December 31, 2012, the SID waived fees in the amount of $1,360,815 and $314,752 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 six months December 31, 2012, the Regular Shares Class of the Fund incurred $1,483,200 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 six months December 31, 2012, BBH waived fees in the amount of $831,214. |
| 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 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 six months ended December 31, 2012, the Fund incurred $153,474 in custody and fund accounting fees. These fees for the Fund were reduced by $3,252 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 six months ended December 31, 2012, was $446. |
| financial statement December 31, 2012 | 19 |
| BBH MONEY MARKET FUND |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| December 31, 2012 (unaudited) |
| 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 six months ended December 31, 2012, the Fund incurred $56,178 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 six months ended December 31, 2012 (unaudited) | For the year ended June 30, 2012 | |||||||||||||||
| Shares | Dollars | Shares | Dollars | |||||||||||||
| Regular Shares | ||||||||||||||||
| Shares sold | 2,166,703,521 | $ | 2,166,703,521 | 3,412,557,112 | $ | 3,412,557,112 | ||||||||||
| Shares issued in connection | ||||||||||||||||
| with reinvestments of | ||||||||||||||||
| dividends | 3,488 | 3,488 | 13,772 | 13,772 | ||||||||||||
| Shares repurchased | (1,592,058,254 | ) | (1,592,058,254 | ) | (3,525,764,066 | ) | (3,525,764,066 | ) | ||||||||
| Net increase (decrease) | 574,648,755 | $ | 574,648,755 | (113,193,182 | ) | $ | (113,193,182 | ) | ||||||||
| Institutional Shares | ||||||||||||||||
| Shares sold | 491,017,805 | $ | 491,017,805 | 1,688,062,462 | $ | 1 ,688,062,462 | ||||||||||
| Shares issued in connection | ||||||||||||||||
| with reinvestments of | ||||||||||||||||
| dividends | 4,643 | 4,643 | 30,644 | 30,644 | ||||||||||||
| Shares repurchased | (499,736,360 | ) | (499,736,360 | ) | (1,748,205,396 | ) | (1,748,205,396 | ) | ||||||||
| Net decrease | (8,713,912 | ) | $ | (8,713,912 | ) | (60,112,290 | ) | $ | (60,112,290 | ) | ||||||
| 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: |
Investments in the Fund are neither insured nor guaranteed by the U.S. Government. Shares of the Fund are not deposits or obligations of, or guaranteed by, BBH or any other bank, and the shares are neither insured nor guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other federal, state or other governmental 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. Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
| 20 |
| BBH MONEY MARKET FUND |
| NOTES TO FINANCIAL STATEMENTS (continued) |
| December 31, 2012 (unaudited) |
The divergence of the Fund’s amortized cost price per share from its market based net asset value per share may result in material dilution or other unfair results to shareholders (amortized cost risk). 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) or certain risks associated with investing in foreign securities not present in domestic investments (foreign investment risk). The Fund is subject to the risk that the securities selected by the investment adviser may underperform (selection risk). Even though the Fund’s investments in repurchase agreements are collateralized at all times, there is some risk to the Fund if the other party to the agreement should default on its obligations (repurchase agreement risk). Political, legislative and economic events may affect a municipal security’s value, interest payments, repayments of principal and the Fund’s ability to sell it (municipal security risk). The SEC and other regulators may adopt additional money market fund regulations which may impact the operation and performance of the Fund (regulatory risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). 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 December 31, 2012 through the date the financial statements were issued, that would merit recognition or additional disclosure in the financial statements. |
| financial statement December 31, 2012 | 21 |
| BBH MONEY MARKET FUND |
| DISCLOSURE OF FUND EXPENSES |
| December 31, 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 (July 1, 2012 to December 31, 2012).
ACTUAL EXPENSES
The first line of the table below 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 below 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.
| 22 |
| BBH MONEY MARKET FUND |
| DISCLOSURE OF FUND EXPENSES (continued) |
| December 31, 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 July 1, 2012 | Ending Account Value December 31, 2012 | Expenses Paid During Period July 1, 2012 to December 31, 20121 | |||
| Class R | |||||
| Actual | $1,000 | $1,000 | $0.76 | ||
| Hypothetical2 | $1,000 | $1,024 | $0.77 | ||
| Beginning Account Value July 1, 2012 | Ending Account Value December 31, 2012 | Expenses Paid During Period July 1, 2012 to December 31, 20121 | |||
| Class I | |||||
| Actual | $1,000 | $1,000 | $0.76 | ||
| Hypothetical2 | $1,000 | $1,024 | $0.77 |
| 1 | Expenses are equal to the Fund’s annualized expense ratio of 0.15% and 0.15% for Regular and Institutional Shares, respectively, multiplied by 184/365 (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 December 31, 2012 | 23 |
| BBH MONEY MARKET FUND |
| DISCLOSURE OF ADVISOR SELECTION |
| December 31, 2012 (unaudited) |
Investment Advisory and Administrative Services Agreement Approval
The 1940 Act requires that the continuance of a fund’s investment advisory agreements must be approved annually both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval.
The Board, a majority of whom are Independent Trustees, held an in person meeting on December 5, 2012, to consider whether to renew the Investment Advisory and Administrative Services Agreement (the “Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. In approving the renewal of the Agreement with respect to the Fund for an additional one year term, the Board determined that the terms of the Agreement were fair and reasonable.
Both in the meeting specifically held to address the continuance of the Agreement and at other meetings during the course of the year, the Board requested and received a variety of materials provided by the Investment Adviser and BBH, including information about personnel, operations and Fund performance. The Board received a memorandum from Counsel to the Trust (“Fund Counsel”) regarding the responsibilities of trustees for the approval of investment advisory agreements. In addition, the Board met in executive session outside the presence of Fund management.
The following is a summary of the factors the Board considered in making its determination to approve continuance of the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel.
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board received and considered information, during the in person meeting held on December 5, 2012, and during the past year, regarding the nature, extent and quality of services provided to the Fund by the Investment Adviser including portfolio management, supervision of operations and compliance and regulatory filings, disclosures to Fund shareholders, general oversight of service providers, assisting the Board, including the Independent Trustees, in their capacity as Trustees, CCO services for the Trust and other services. The Board considered the resources of the Investment Adviser and BBH dedicated to the Fund noting that BBH also provides administrative, custody, accounting and shareholder services to the Fund.
| 24 |
| BBH MONEY MARKET FUND |
| DISCLOSURE OF ADVISOR SELECTION (continued) |
| December 31, 2012 (unaudited) |
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that in the course of its regular meetings it received reports on each of the foregoing topics. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Investment Results
The Board received and considered performance information for the Fund. The Board considered the investment results of the Fund as compared with a selected securities index as well as a selection of peer funds. The Board reviewed information showing performance of the Fund over the 1-, 3-, 5- and 10-year periods ended September 30, 2012 as compared to an appropriate securities benchmark and fund peers over comparable periods. In addition, the Board received detailed performance information for the Fund at other meetings held during the year. In evaluating the performance of the Fund, the Board considered risk expectations for the Fund as well as the level of Fund performance in the context of its review of Fund expenses and the Investment Adviser’s profitability. Based on this information, the Board concluded that it was satisfied with the investment results that the Investment Adviser was able to achieve for the Fund.
Fee Rates
The Board considered the fee rates paid by the Fund to the Investment Adviser and BBH in light of the nature, extent and quality of the services provided to the Fund. The Board also considered and reviewed the fee waiver arrangement that was in place for the Fund and considered the actual fee rates, after taking into account the waiver. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers. The Board received and considered information comparing the Fund’s investment advisory and administration fee and the Fund’s net total expenses with those of a selection of peer funds. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be reasonable in light of the services rendered and was the result of arm’s length negotiations.
| financial statement December 31, 2012 | 25 |
| BBH MONEY MARKET FUND |
| DISCLOSURE OF ADVISOR SELECTION (continued) |
| December 31, 2012 (unaudited) |
Costs of Services Provided and Profitability
The Board reviewed the Investment Adviser and BBH’s profitability data for the Fund for the nine-months ended September 30, 2012, and for the prior two-year period. The data also included the effect of revenue generated by the shareholder servicing, custody, accounting and administration fees paid by the Fund to BBH. The Board reviewed the allocation methods used in preparing the profitability data. The Board also considered the effect of fall-out benefits on the expenses of the Investment Adviser and BBH. The Board focused on profitability of the Investment Adviser and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that the Investment Adviser and BBH’s profitability were not excessive in light of the nature, extent and quality of services provided to the Fund.
The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s administrator, custodian, accounting and shareholder servicing agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
Economies of Scale
The Board considered the fee schedule for the Fund, noting the existence of a graduated investment advisory fee schedule. Based on information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s current size and expense structure, the Board concluded that the breakpoints for the Fund were reasonable. The Board concluded that the fees paid by the Fund to Investment Adviser were reasonable based on the comparative performance, expense information, the cost of the services provided and the profits to be realized by the Investment Adviser.
| 26 |
| BBH MONEY MARKET FUND |
| CONFLICTS OF INTEREST |
| December 31, 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 shareholder servicing 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 net assets, the Investment Adviser and its affiliates may have an incentive to seek to overvalue certain assets. From time to time, BBH may buy or sell shares of the Fund on behalf of discretionary wealth management clients.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, 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.
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 December 31, 2012 | 27 |
| Administrator | Investment Adviser |
| Brown Brothers Harriman & Co. | Brown Brothers 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 | |
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.
Not required for this semi-annual report on Form N-CSR.
|
Item 3. Audit Committee Financial Expert.
Not required for this semi-annual report on Form N-CSR.
|
Item 4. Principal Accountant Fees and Services.
Not required for this semi-annual report on Form N-CSR.
|
Item 5. Audit Committee of Listed Registrants.
| (a) | Not required for this semi-annual report on Form N-CSR.
|
| (b) | Not required. |
Item 6. Investments.
| (a) | This schedule 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 required for this semi-annual report on Form N-CSR.
|
| (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: March 8, 2013
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.
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By: (Signature and Title)
/s/ Radford W. Klotz
Radford W. Klotz
Title: President (Principal Executive Officer)
Date: March 8, 2013
By: (Signature and Title)
/s/ Charles H. Schreiber
Charles H. Schreiber
Title: Treasurer (Principal Financial Officer)
Date: March 8, 2013